All redemptions from July 01, 2011 to June 30, 2012 were
paid from fund’s own resources without any borrowing from
the banks.

1,439
2,421
4.13

NI(U)T
Capital Gains
Dividend Income
Earnings Per Unit (Rs.)

FY12
Rs. in Mn

Risk Disclaimer: All investments in mutual funds are subject to market risks. The NAV of units may go up or down based on the market conditions. Past performance is not necessarily indicative of the future results.
Please read the Offering Documents to understand the investment policies and the risks involved.

17-21
The resolve that has been dissolved
Fair basis for quoting yardstick interest rates
Sovereign risk rating: the slide gains speed
London Olympics: the challenges they pose
Of the coalition’s full term in office

31-33. Gas Outages in Pakistan

23-27
Techno-war: the deadly invention
The ‘Longest War’: overcoming lies
and indifference
Contempt of Court Bill-2012: an attempt to
silence the judiciary?

51-52. Granting residential security for the
marginalized: issues and constraints

29-33
Global drought and its impact on food prices
The economy: where is it headed?
Gas Outages in Pakistan

35-37
Auto spare-parts industry: is it being
sidelined?
38-42
A shameless refusal to learn lessons
Systemic risk: why it must be contained?
Bank security: prudence of out-sourcing it
Biotechnology and its impact

43-45

47-49
Productivity potential of main crops
in Pakistan

HEALTH & ENVIRONMENT

51-52
Granting residential security for the
marginalized: issues and constraints

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Editor’s note
66th Independence Day of Pakistan
On 14th August this year we shall be celebrating the 66th year of Pakistan’s
emergence on the world map as a sovereign, independent nation on 14th August
1947. Value Chain wishes its readers a Very Happy Independence Day.
The struggle for Pakistan and its ultimate achievement is the very story of great
human ideals. In the beginning of the independence movement, the Muslims,
Hindus and other religious groups had gelled together and acted jointly to turn
back the yoke of the British rule. It was, however, later realized that the Muslims
and the Hindus were two different and distinct identities based on nationality,
religion, way of life, customs, traditions, culture and historical conditions. Therefore, in the early 20th century, the Muslims began to pursue a separate homeland
for themselves. The cherished dream came true as the culmination of decades
long struggle and sacrifices of our freedom fighters under the dynamic leadership
of the Father of the Nation, Quaid-e-Azam Muhammad Ali Jinnah.
The Muslims had to pay a heavy price for the freedom achieved; they had to leave
their homes and hearths and suffer persecution of an unimaginable magnitude.
So, while celebrating the independence day our thoughts must go back to the
relentless struggle launched and sacrifices offered for achieving Pakistan as a
country where people could live freely in peace, practice their faith without fear
of insecurity and enjoy respect for the full range of their human rights, irrespective of their caste or creed as categorically pronounced by the Quaid-e-Azam, a
few days prior to the Partition of the Sub-continent.
The birth of Pakistan devolves on its inhabitants enormous responsibilities. In his
message to the nation on the occasion of inauguration of Pakistan Broadcasting
Services on 15th August 1947, the Quaid-e-Azam had said, “the creation of the
new state has placed tremendous responsibility on the citizens of Pakistan. It gives
them the opportunity to demonstrate to the world how a nation, containing many
elements, can live in peace and amity and work for the betterment of all, irrespective of caste or creed. Our object should be peace within and peace without.”
Sadly, these wise words of the Father of the Nation have not been heeded to.
The Quaid-e-Azam stood for democracy, rule of law, tolerance and corruptionfree society. In his historic address to the first Constituent Assembly of Pakistan
he identified the first duty of the government as the maintenance of law and
order. What we witness today is lawlessness, death and destruction, sectarianism,
loot and arson, kidnapping, target killing. Corruption has permeated in all
segments of our society infecting every aspect of our political, social and
economic activity. Social injustice and poverty are destroying the society’s
cohesion and stability. The writ of the state is nowhere to be seen. Karachi, about
which the Quaid-e-Azam had said, “Let us strive to make this beautiful town a
great metropolis....” has become hostage to the vested interests and plunged into
one of darkness and intolerance.
If the Quaid’s dream of Pakistan has to be realized, the political leadership,
especially the government, will have to rise to ensure the maintenance of law and
order and become a role model of integrity and selfless devotion to the cause of
serving the masses, strengthen the institutions of accountability for dispensation
of justice and fair play. At the same time, we as a nation must also reaffirm and
resolve to devote our time and energy in the service of the country. This calls for
sacrifice, self-restraint, self-discipline, patience, sympathy for fellowmen and the
spirit of self-actualization.

L etters to the Editor

Yusuf Raza Gilani: is he really out?
Sir, this is with reference to Mr Abdullah
Zahir’s letter (Value Chain July Ed) wherein
he rightly welcomed Gilani’s exit from the
PM office but the fact that, reportedly, he
resides in the Presidency, belies the fact
that he has really been ousted. The way he
used the state power and funds to ensure
that his son won the election to the seat he
was forced to vacate proves that he is still
very much in power.
That’s the way the PPP wants to show the
judiciary the limits to its powers. What we
still have is a government that is seen as
credible by just 21% of the Pakistanis and
one-third of them think they must leave.
Shahid Saleem
Karachi
Sir, I agree with Mr A. Shahid view (Value
Chain July Ed) about the way the British
PM went about ‘certifying’ the conduct of
Yusuf Raza Gilani in ‘consolidating’ what
we now have in Pakistan in the name of
democracy. But that was not unexpected;
look at Davis Cameron’s own conduct in
Britain.
Isn’t it shocking that Cameron’s press aid
was accused of an act like phone hacking?
Doesn’t it prove the fact that his defence
of his role in contacting highly questionable characters in the media was doubtful?
The British PM’s praise for Gilani proved
the saying “birds of the same feather fly
together.”
Abdullah Jan
Peshawar
Misery without an end
Sir, it is a fact that in the name of democracy Pakistanis are being virtually held
hostage to a governance system that has
repeatedly failed to deliver. As long as
two-third of country’s electorate remains
enslaved to its landed aristocracy, and
hence obliged to vote for the landlords,

Pakistan could go from bad to worse because
its parliament will always be dominated by
landlords.
This class has a birth defect–zero, or very
limited vision–that doesn’t extend beyond
serving their self-interests. That this is true is
proved each time democracy descends on
Pakistan, be it of the PPP or the PML-N
brand. These fellows know zilch about the
real needs of the common Pakistanis, macroeconomics, global economic trends, and how
to avoid their negative effects.
Zahid Ali
Karachi
Sir, the Supreme Court has yet again given the
PM more time to comply with court instructions about writing to the Swiss courts to
reopen money laundering cases against
President Asif Ali Zardari.
While the vast majority stands with the
Supreme Court, the view slowly gaining
credibility is that the Supreme Court isn’t
acting as it would want to, because it is not
sure about the support of the other pillars of
the state if it takes a final drastic but needed
and nation-saving action.
Consequently, Pakistan is being made to die a
slow death in the name of defence of democracy that cannot deliver until it is ensured that
people vote of their own choice, not that of
their landlords–a task no caretaker regime
with a 90-day man-date can deliver because
the filth needing clearance is far too strongly
rooted.
Jehangir Khan
Lahore
Sir, it is odd that the PPP’s sole concern is
completing its term, wherein all it did was to
disable even the systems that were working.
Saleem Khawjah (Value Chain July Ed) is right
in predicting that much before the elections
power shortfall will cause the downfall of this
regime. With Raja Rental now in charge,
things could only go from bad to worse.
Jafar Khan
Faisalabad
Sir, the coalition regime’s planned attack
(Contempt of Court Bill) on judiciary’s right to
hold key state officeholders account-able for
their conduct admits the fact that the regime
can’t do anything within the parameters of the
law. Also, that the state officeholders don’t
want constitutionality to bar them from
law-breaking.
S Jaffery
Hyderabad
Depreciation of the Rupee
Sir, the slide in the Pak Rupee’s exchange rate
is most worrisome. I agree with the view of
Saghir Bhai (Value Chain July Ed) that Governor SBP was silenced; it seems right given
rumours about bad relations between the
Finance Minister and the SBP Governor.
This is most unfortunate

10

because Governor SBP is at least trying to
forewarn about the coming economic
collapse.
Ahmed Ali
Karachi
Drought and its consequences
Sir, it is now clear that 2012 will be the worst
drought-stricken year in decades in India,
the US, China and Pakistan. Wheat prices
are rising. With Pakistan’s reserves bound to
dwindle, will there be enough to repay its
external debt and also import the food crop
that we will run short of?
M.A. Khan
Islamabad
POA-PSB controversy
Sir, the tussle between Pakistan Olympic
Association and Pakistan Sports Board, that
threatened to force Pakistan out of the 2012
London Olympics was another example of
how state interference hurts rather than
support any activity. As per the governing
rules of the International Olympic
Committee, governments can’t interfere in
the affairs of their national Olympic
Committees. The fact that this interference
reached serious proportions reflects on
Pakistan Sports Board’s sense of responsibility and must be investigated to identify
the culprits.
Masroos Ahmed
Sialkot
NATO’s supplies
Sir, isn’t it shocking that, despite the US
apology on the Salala affair not being an
apology but expression of ‘sorrow’ over
Pakistan’s loss, our government agreed to
resume NATO’s supplies through Pakistan?
It was simple submission to the ‘Master’s’
will. By not apologizing for its raid on Salala,
the US has proved that it does as it pleases.
Rumour has it that Pakistan was threatened
with a full-fledged attack if it refused to
resume NATO supplies– a character in line
with that of a ‘strategic ally’ of Pakistan that
the US claims it is.
Jamal Karimi
Karachi
“Value Chain” welcomes the views of
its valued readers. Please send us your
views on the address below:
Fatima Khalid Publications (Pvt) Ltd.
Room No. 612, Clifton Centre, Block 5,
Clifton, Karachi
Email: ask@valuechain.com.pk
The Editor reserves the right to edit your
letters for making it brief or for any
linguistic flaws therein.

August 2012

G lobal Briefs
Global events
President’s impeachment in Romania:
Romania’s parliament on July 6 voted
to impeach President Traian Basescu in
a spiraling political crisis that has raised
warnings in the West that the country’s
democracy is under threat.

Revolt in Japan’s ruling party: Japanese
political heavyweight Ichiro Ozawa and
dozens of other lawmakers quit the
ruling party on July 2 over a plan to
increase the sales tax, but the government will retain its majority in the lower
house of parliament.
Tunisian minister’s resignation:
Tunishia’s anti-corruption minister has
quit, accusing the government of failing
to do enough to overhaul the public
sector and root out corruption.

Japan eyes political shake-up: Japanese
political veteran Ichiro Ozawa and dozens
of other lawmakers who quit the ruling
party over a tax hike plan launched a new
party on July 11 in a bid to challenge the
government, possibly heralding an era of
political shake-up.
Syria denies Treimsa massacre: Syria
has denied its armed forces carried out
a massacre in Treimsa but said 37
gunmen and two civilians were killed in
clashes there with rebels.
Iran issues new oil blockade warning: A
naval chief of Iran said on July 14 that
Iran could prevent even “a single drop
of oil” passing through the Strait of
Hormuz if its security is threatened.

Turkey scraps conspiracy courts: The
Turkish parliament has approved a reform abolishing the special courts used in
coup conspiracy cases, without touching
on existing prosecutions of hundreds of
military officers that have drawn wide
criticism.
Philippines-China dispute: Philippine
President Beningno Aquino said on July
2 he may ask the United States to deploy
spy planes over the South China Sea to
help monitor the disputed waters, a move
that could worsen ten- sions with China.
Iran readies ballistic missile drill: Iran
on July 2 said it was readying ballistic
missile war games simulating a counterattack against US or Israeli targets in the
region in the event of air strikes on its
nuclear facilities.
Police raid Sarkozy’s home in Paris:
Police raided the home and offices of
former French President Nicolas Sarkozy
on July 3 as part of a judicial inquiry into
financial relations between his political
camp and the richest woman in France
L’Oreal accused of having funded
Sarkozy’s 2007 election campaign.
Barclays CEO, COO quit: Barclay’s
chief executive Bob Diamond resigned
on July 3, followed a few hours later by
the bank’s chief operating officer on
charges of rigging of a key global
interest rate.

March against nuclear power in Tokyo:
More than 100,000 anti-nuclear
protesters marched through central
Tokyo on July 16 to voice their opposition to atomic power.
Microsoft breaks from NBC to launch
own news portal: Software giant Microsoft has parted company with NBC News,
pulling out of their joint venture MSNBC
to launch its own online news service.
Pak-China Friendship Industrial Park
in Donggang: China has offered to set
up a Pakistan-China Friendship Industrial Park in Donggang city in China’s
north-east Liaonning province.
Brawls in Egyptian court: Brawls broke
out in an Egyptian courtroom as
judges tried to debate rulings on July
17 that could either bolster the
country’s new Islamist President
Mohamed Mursi, or undermine him in
his power struggle with the military.

11

Mukherjee elected new Indian President: Former finance minister Pranab
Mukherjee was elected Indian president
on July 22.
Iraq warns Turkey against airspace
violation: On July 17, Iraq warned Turkey
against violating its airspace and territory
and said it planned to protest to the UN
Security Council after its radars had repeatedly detected Turkish warplanes.
US missile defence station in Qatar:
The US is building a missile defence radar
station at a covert location in Qatar. The
site will be part of a system intended to
defend the interests of the United States
and its allies against Iranian rockets.
China, Russia veto Syria sanctions
resolution at UN: China and Russia
vetoed on July 19 a UN resolution that
could have imposed sanctions on the
Syrian government angering the West as
hundreds fled an army offensive against
rebel districts of Damascus.
Syria assaults Damascus: Syrian forces
launched an all-out assault on opposition
strongholds in Damascus on July 20. The
army has reportedly decided to use all the
weapons in its possession to finish the
terrorists off.
Indonesian woman arrested for Japan
tsunami fraud: South Korean police said
on July 23 they had arrested an Indonesian
woman for a scam related to Japan’s
earthquake and tsunami disaster in March
last year.
Syria threatens use of chemical arms:
On July 23, Syria acknowledged that it had
chemical and biological weapons and said
it could use them if foreign countries
intervened.
Syria threatens use of chemical arms: On
july 23, Syria acknowledged that it had chemical and biological weapons and said it could
use them if foreign countries intervened.
August 2012

G lobal Briefs
Global economy
IMF warns US against
cutting deficit too fast:
The International Monetary Fund (IMF) on July
3 pared its growth
forecast for the US economy and
warned that the Obama administration
could be slicing the deficit too fast for
the weak economy. IMF estimated 2012
US economic growth at a “repit” 2.0
percent, down from April’s forecast of
2.1 percent, and said even that outlook
was at risk from both domestic and
international threats.

for rises of 0.4 and 1.2 percent respectively. According to the economists, the
increases were in part a correction after
last month’s dismal data.
Austerity measures in Spain: Yielding to
EU pressure to try to avoid a full state
bailout, recession-plagued Spain on July
11 unveiled new austerity measures
designed to slash 65 billion euros from
the public deficit by 2014.

$16bn aid to Afghanistan pledged: On
July 8, major donors at Tokyo conference pledged to give Afghanistan $16
billion in development aid through 2015
as they try to prevent it from sliding back
into chaos when foreign troops leave,
but demanded reforms to fight
widespread corruption.
Visa, MasterCard, banks
in $7.25bn retail settlement: Visa, MasterCard
Inc and banks that issue
their credit cards have
agreed to a $7.25 billion
settlement with US retailers in a lawsuit over the
fixing of credit and debit card fees in
what could be the largest antitrust settlement in US history. The proposed settlement involves a payment to a class of
stores of $6 billion from Visa, MasterCard and more than a dozen of the
country’s largest banks who issue the
companies’ cards.
Chinese economy under pressure:
Chinese Premier Wen Jiabao said on July
8 that the country’s economy faces downward pressure calling for more aggressive
moves to keep growth on track.
German exports, imports rebound:
German exports rose a seasonally adjusted
3.9 percent while imports surged6.3
percent, far outperforming expectations

IMF cuts global growth forecast: IMF
on July 16 cut its global growth forecast
and warned that the outlook could dim
further if policymakers in Europe do not
act with enough force and speed to quell
their region’s debt crisis.
Iraq initials oil block deal with Kuwaitled group: On July 16, Iraq initialed an oil
block exploration and development
contract with a consortium led by Kuwait
Energy as part of its drive to attract more
foreign investment.

Recession in Europe’s big economies:
According to business surveys, all of
Europe’s biggest economies are in recession or heading there and there is little
sign things will improve soon.
BoE injects Pound 50bn to haul Britain
out of recession: The Bank of England
decided on July 5 to pump out another
Pound 50 billion of stimulus cash, in a
bid to haul Britain out of recession and
ward off contagion from the euro zone
sovereign debt crisis.

Saudi development fund to lend
Tunisia $ 220 million: The Saudi Fund
for Development will extend as total of
about $220 million to Tunisia in
low-interest loans repayable over 20 years
at 2 percent interest.

EU watchdog warns banks of
challenges ahead: The European Banking Authority Chairman Andrea Enria
has said there remained significant
challenges ahead for Europe’s banks after
they successfully met new requirements
to bolster their core capital buffers. 27
banks had hiked their combined capital
by 94.4 billion euros ($116 billion) to
meet the expectations of the watchdog
and fill a 76 billion euros shortfall to
make them strong enough to withstand
the euro zone debt crisis.

Spanish banks aid approved: Germany’s
parliament approved on July 19 a European
aid package for crisis-wracked Spanish banks
that aims to prevent Spain’s whole economy
being dragged deeper into the mire.
Chinese loans to African countries:
Chinese President Hu Jintao on July 19
offered $20 billion in loans to African
countries over the next three years, boosting a relationship that has been criticized
by the West and given Beijing growing
access to the resource-rich continent.

London, Singapore Stock Exchange
Cooperation: The London and Singapore stock exchanges announced on July
11 an agreement to facilitate the crosstrading of the most actively-traded
stocks of their respective member firms.
Global economic slowdown and oil
prices: The International Energy
Agency (IEA) said on July 12 that global
economic slowdown could put a lid on
oil prices but there is a risk “nasty supply
surprises” could reignite a market rally.
Eurozone crisis and Asia’s growth:
According to new figures released by
Asian Development Bank, Developing
Asia’s 2012 growth prospects are being
hit by the worsening eurozone crisis and
a sluggish recovery in the United States.
The Bank revised its 2012 growth
forecasts for the US and Europe,
projecting US economic growth of 1.9
percent, down from 2.0 percent, and
saying it expects the eurozone economy
to contract 0.7 percent, up from 0.5
percent previously.

12

Goldman’s quarterly profit falls:
Goldman Sachs Group Inc’s quarterly
profit fell 12 percent as investment income
plunged, reflecting the pressure the bank
faces as demand for its services remains
tepid and markets fluctuate. Goldman plans
to reduce annual costs by another $500
million, in addition to its previously planned
$1.4 billion of annual expense reductions.
Britain may need more credit-easing to
boost growth: The IMF on July 19 said that
recession-hit Britain may need to implement
additional measures to help unblock credit
markets and stimulate economic growth.
The Fund lauded the Bank of England for
its recent decision to pump out another
Pound 50 billion ($ 79 billion) of new cash.
August 2012

N ational Briefs
Pak politics
Millions of rupees paid to lawyers for
defence of govt. cases in SC: Law
Minister Farooq H. Naek on July 6 reportedly told the National Assembly that a
total of Rs. 24.2 million was paid to
Senator Babar Awan, Rs. 7.6 million to
Hafeez Pirzada and Rs. 5.9 million to
Waseem Sajjad for taking up government
cases at the highest judicial forum.

Imran Khan demands action against
NAB Chief: Pakistan Tehreek-e-Insaaf
Chief Imran Khan has demanded immediate resignation of NAB Chairman
Fasih Bukhari over an alleged statement
regarding cases against Sharif brothers.
He also urged the Chief Justice Iftikhar
Muhammad Chaudhry to take suo muto
action against him.
Cases against Sharif brothers in process:
NAB has clarified that it has not closed even
a single case against Sharif brothers and that
the proceedings of cases against them are
under process as per provisions of National
Accountability Ordinance 1999.

No new agreement with Pakistan on
NATO supply routes: Deputy Chief of
Mission of the US Embassy Richard
Hoagland said on July 6 that there was no
new agreement with Pakistan regarding
the reopening of the NATO supply
routes. He said, the relations were resumed
from the point where they had been left in
November last year.
Pakistan to scan NATO supply
containers: Customs authorities reportedly said on July 6 that all containers
passing through Pakistan to supply NATO
troops in Afghanistan will be scanned to
ensure they do not contain lethal supplies.

NATO truckers demand security:
NATO truckers on July 3 welcomed
Pakistan’s decision to reopen supply lines
into Afghanistan but said that they feared
Taliban attacks, and demanded security
guarantees before the resumption.
Malik Riaz tenders unconditional
apology: Real estate tycoon Mlik Riaz
Hussain on July 4 told Supreme Court that
his controversial press conference had
nothing to do with the Chief Justice of
Pakistan; it aimed at unveiling corruption
of Chief Justice’s son Dr. Arsalan Iftikhar.
Addressing the court, the counsel for
Malik Riaz also said that if that press
conference had created any hurdle in
dispensation of justice, his client offered
an unconditional apology.

Senate passes Contempt of Court Bill:
Despite resistance from top PPP
stalwarts and opposition parties walk out
in protest, the Senate on July 11 passed
the Contempt of Court Bill 2012.
Taliban urged to enter dialogue: In a
joint statement US Secretary of State
Hillary Clinton, Afghan Foreign Minister
Zalmai Rassoul and Pakistan’s Foreign
Minister Hina Rabbani Khar reiterated
on July 8 their call for Taliban to abandon
violence and enter a dialogue with
Afghan government.

Afghanistan, Pakistan clash over
border violence: Pakistani officials have
accused up to 60 Afghan soldiers on July
2 crossed into Pakistani territory sparking clashes that killed two tribesmen.
Reopening ground lines of communication for NATO troops: Pakistan on
July 3 conveyed to United States that it
was reopening the ground lines of
communications free of charge into
Afghanistan, after the US issued an
apology for the November killing of 24
Pakistani troops in a Nato air strike.

Afghanistan warns Pakistan: Afghanistan on July 22 warned Pakistan that any
further cross-border shelling could significantly harm relations between the two
countries. According to reports, more
than 300 heavy artillery shells and rockets
were fired from Pakistan into Dangam
district of eastern Kunar province on July
20 and 21 killing at least four people.

US-Pakistan relationship: US Secretary of
State Hillary Clinton said on July 8 that the
US-Pakistan relationship remains challenging
for both despite the reopening of land routes
to re-supply US troops in Afghanistan.
Private sector role in economy: Talking
to the office-bearers of Islamabad Chambers of Commerce and Industry on July 8
in Islamabad, Prime Minister Raja Pervez
Ashraf has said that private sector is the
engine of growth and he would like to see
it play a leading role in the country’s
economy.
SC powers under Article 8: Speaking at
Roll-Signing Ceremony of 16 newly
enrolled advocates for the Supreme
Court on July 7 at SC’s Karachi Registry,
Chief Justice of Pakistan Iftikhar
Muhammad Chaudhry said that Article 8
of the Constitution empowers the
Supreme Court to strike down any
legislation which encroaches upon the
basic rights of citizens.

13

Alleged secret deal: In an alleged
secret deal, Britain has reportedly offered
to revive British nationality of the
interior minister and other dual nation
Pakistani parliamentarians in return for
implementation of their long-standing
demand of repealing the death penalty.
The British government could deport
tens of thousands of undesirable
Pakistani migrants if death penalty is
abolished in Pakistan.
Musharraf for elections under military:
Pakistan’s former President Gen (r)
Pervez Musharruf has said that general
elections should be held in the country
under military supervision so that sincere
and clean representatives of masses
could be elected.
CEC appointment challenged in SC:
A petition was filed in the Supreme
Court on July 16 with a plea to declare
the appointment of Fakhruddin G
Ebrahimm as chief election commissioner against the provisions of the
constitution.
August 2012

N ational Briefs
Pak economy
Sales tax reduced to Rs 7 per unit:
The Federal Board of Revenue has
reduced sales tax from Rs. 8 to Rs. 7 per
unit of electricity consumed by the
steel-melters and steel-rerolling units.

Ministries asked to import power,
LNG from India: The Federal Cabinet
has directed concerned Ministries to
seriously consider importing electricity
and Liquefied Natural Gas from India to
deal with energy crisis.
Legal protection to investors under
SEZ Bill 2012: Addressing a press conference on July 14, Board of Investment
Chairman Saleem Mandviwalla said that
newly approved Special Economic Zone
Bill 2012 provides guarantee to foreign
and local investors that incentives once
granted would not be withdrawn due to
conflict of interest.

Trade package for Pakistan: European Parliament is likely to approve
trade package for Pakistan in September
2012 as the EUâ&#x20AC;&#x2122;s committee for International Trade has cleared the package
meant for flood affectees of 2010.
WB-FBR meeting on new revenue
mobilization project: A World Bank
mission has initiated meetings with the
Federal Board of Revenue high-ups for
launching a new revenue mobilization
project for continuation of tax reforms
to raise revenue collection by improving
effectiveness, accountability and transparency of tax machinery through
institutional changes in the FBR.
Pakistan earns $ 425mn from cotton
export: Pakistan has reportedly earned $
425 million from export of cotton while
$ 320 million was spent on improving
the commodity during fiscal 2011-12.
Remittances cross $13 billion: Remittances by overseas Pakistanis crossed $
13 billion mark during the last fiscal year
(2011-12). They remitted $ 13.187
billion during the year ended 30th June
2012, showing an impressive growth of
17.73 percent as compared to $ 11.201
billion received during FY 2011.
Romania offers gateway to EU
market: Talking to a delegation of
FPCCI, Ambassador of Romania to
Pakistan Emilian Ion said that Romania
will introduce Pakistani goods in the EU,
giving the business community of
Pakistan an opportunity to exploit the
situation created after opening of
borders to Europe. He said that
Pakistani businessmen can export their
products specially textile, garments,
leather etc to Romania and also to other
EU countries through Bucharest.

WHT to be brought down to 0.2pc: To
facilitate business community, the Federal
Board of Revenue (FBR) has reportedly
decided to reduce the rate of the 0.5 percent
withholding tax under Section 153A of the
Income Tax Ordinance, 2001 to 0.3 or 0.2
percent for those sectors paying lower rate
of turnover tax below 0.5 percent.

Korea to invest in Pakistan: Ambassador
of Republic of Korea, Choi Choong Joo has
said his country would be eager to invest in
and enhance trade relations with Pakistan.
Decline in FDI: For the fourth consecutive year, Foreign Direct Investment has
posted a massive decline mainly due to
energy crisis, adverse law and order
situation, lack of infrastructure and
instability in the economic policies.
Energy crisis as key impediment to
FDI: Addressing Pakistan-Japan joint
business meeting on July 16, Japanese
Ambassador to Pakistan, Heroshi Oe said
that energy crisis and deteriorating law and
order situation in Pakistan were the key
impediments to foreign direct investment.
EXIM Bank loans for dams projects:
The EXIM Bank of China has agreed to
provide $700 million at relatively low
interest rate for damsâ&#x20AC;&#x2122; projects being
executed by WAPDA to enhance water
storage capacity and generate more power

14

Financing Iran-Pakistan gas pipeline project: Italy, Russia and China
have shown interest in financing the
construction of Iran-Pakistan Gas
Pipeline Project. The project is likely to
cost $ 1.25 billion, and will initially bring
around 750 million cubic feet per day
(mmcfd) of gas, which will be gradually
increased to over 1.5 billion cubic feet
per day.
President Zardari invites Japanese
business to invest in Pakistan:
Addrssing Pakistan-Japan Business
Roundtable Meeting , Pressident Asif
Ali Zardari on July 16 invited Japanese
businessmen to take advantage of
natural resource potential, trained and
hard working work force and
geographic location of Pakistan and
invest in various sectors for mutual
benefit of the two countries.
C/A deficit: According to State Bank
of Pakistan, the financial year, which
started with surplus current account,
has ended ukp with a huge deficit of
$4.5 billion due to heavy payments on
imports of goods and services with
declining inflows of earnings.
$1.5bn CSF by Dec.2012: Pakistan will
reportedly receive $1.5 billion of Coalition Support Fund by Decembere 2012
after the government resumed NATO
supplies following apology from the US
on Salala check post incident.
APTMA sets up sustainable production centre: To cope with the energy
crisis faced by the textile industry,
APTMA has initiated sustainable energy
management system implementation
programme.
Contton exports: According to exporters Pakistan exported a record number
of 1.5 million cotton bales in July to
June 2011- 12, which is 50 percent more
compared with 1.0 million bales
exported in July to June 2011.
August 2012

V oice of Industry
Trade & Industry briefs
Reduction in POL prices: Rawalpindi
Chamber of Commerce and Industry
(RCCI) has hailed government decision
of reducing petroleum prices which he
said would help reduce hike and
inflation and promote business activities in the country.
LCCI demands withdrawal of increase
in gas tariff: Lahore Chamber of
Commerce and Industry (LCCI) on July 2
welcomed the decrease in POL prices but
urged the government to withdraw 10
percent increase in gas tariff for industries
that is bound to hit the export sector.

First Trade Delegation from Afghanistan visited Pakistan: President PAJCCI,
Mr. M. Zubair Motiwala welcomed the
delegation at the Membership Kiosk of
PAJCCI at “My Karachi” event and led the
networking activity of the delegation at the
Expo Centre. The delegation visited other
stalls at the exhibition and was enthralled
with the response shown by business
community of Pakistan at the Membership kiosk of PAJCCI.
Only 30% small-scale units operational
in Karachi: Traders said on July 12 that
nearly 70 percent of cottage industry units
have closed down in the past 10 years,
primarily because of the rising cost of
electricity and the dumping of cheap
Chinese products in the local markets.
They blamed the government for not
introducing pro-industry policies.
Calls for focus on improving competitiveness: President, Islamabad Chamber
of Commerce and Industry (ICCI),
Yassar Sakhi has suggested that the new
trade policy should focus on improving
the competitiveness of export-oriented
industries to improve products quality and
enhance country’s exports. He said despite
having a potential demographic dividend,
industries in Pakistan were facing shortage
of skilled labour. He suggested that skills
upgradation programmes should be
conducted through chambers of commerce
and industry to provide skilled manpower
to industries.

Value-added textile sector seeks
role in SBP initiatives: On July 6,
value added textile sector expressed
concern over lack of its representation in the State Bank of Pakistan’s
support programme for textile
sector boost. According to Chief
Coordinator, Pakistan Readymade
Garments
Manufacturers
and
Exporters Association, Ijaz A.
Khokhar, value-added textile sector
provides huge employment besides
having a $4 billion export share in
the country’s total economy through
export and should not be ignored by
SBP in its any support initiative to
the entire sector.
APTMA urges cut in GIDC: All
Pakistan Textile Mills Association
(APTMA) Chairman Mohsin Aziz
has urged the government to immediately cut the Gas Infrastructure
Cess(GIDC) to Rs. 50 per million
British Thermal Unit (mmbtu) as
the industry is unable to pay Rs. 100
per mmbtu under the prevailing
adverse business environment for
the industry.

Sindh CM visits KCCI: KCCI President Mian Abrar Ahmad in his meeting with Sindh Chief Minister Syed
Qaim Ali Shah underlined the need of
executing concrete safety and security
measures to help revive the commercial and industrial activities in Sindh
province in general and in Karachi in
particular. He also apprised the Chief
Minister about KCCI delegation’s visit
to the USA and meetings with important dignitaries of US State Department and other organizations including officials of the USAID to enhance
Pak-US bilateral trade. He said the
delegation also dispelled the biased
perception of Pakistan being depicted
by some foreign media and portrayed
real and true image of Pakistan. Viewpoints were also given on energy, Pak
Iran gas pipeline and signing of
Pak-US Bilateral Investment.

15

SCCI demands completion of devolution process: Sarhad Chamber of
Commerce & Industry has demanded
of the federal government to complete
devolution process of Gems and
Mineral affairs to provinces in the light
of 18th constitutional amendments.

KCCI urges US to bridge gap of
trust deficit: President of Karachi
Chamber of Commerce and Industry
(KCCI), Mian Abrar Ahmad has urged
the US government to bridge the gap
of US-Pakistan trust deficit through
trade. Talking to Shannon Grewer,
Counsel, Locke Lord LLP, USA, in
Karachi on July 5, he said that 40
American companies were successfully
operating in Pakistan since last many
decades and not a single company was
closed down. Hence, he said , more US
companies should come and invest in
Pakistan and capture the markets of
three trading blocks of which Pakistan
is located in the centre. He said that US
companies may establish industries in
Pakistan and export to countries of
ECO Block, SAARC block and the
Central Asian countries. Reciprocating,
Counsel Shannon Grewer said that
investors want to invest in Pakistan but
hesitate and do not know from where
to initiate.
New TDAP chief: Pakistan Bedwear
Exporters Association has welcomed
the removal of Tariq Iqbal Puri as
Chief Executive of Trade Development Authority of Pakistan (TDAP)
and demanded appointment of “a
committed professional” to head the
body.
SCCI and RCCI sign MoU for
industrial cooperation: The Sarhad
Chamber of Commerce and Industry
(SCCI) and Rawalpindi Chamaber of
Commerce and Industry (RCCI)
formally signed an MoU for boosting
mutual relations, information sharing
and extending cooperation in industrial
and commercial sector.
August 2012

V oice of Industry
Trade & Industry briefs
Traders criticize new hike in power
tariffs: The business community and industrialists have criticized government for
making another Rs. 1.60 per unit increase in
the power tariff and demanded of the
government to immediately withdraw the
unjustified decision. They said that while the
industry is already struggling hard to survive
due to frequent increases in utilities and
POL prices and imposition of other levies
and surcharges, the government has allowed
another bombshell to kill the industry.

KCCI urges govt to check rising
prices: Senior Vice President of Karachi
Chamber of Commerce and Industry,
Younis Bashir on July 14 expressed
dismay over 25 percent increase in prices
of items consumed during Ramazan and
urged the government to take appropriate
measures to control price hike and take
strict action against hoarders.
PFMA alleges illegal tax collection
from trucks carrying flour to Afghanistan: In his meeting with Minister of
State for Food Security, Pakistan Flour
Mills Association Chairman Mohammad
Naeem Butt has alleged collection of
illegal tax from Afghanistan bound trucks
carrying flour to Afghanistan. He also
called for bringing the support price of
wheat to a certain level or allow the industry to import cheap commodity from
foreign markets and after grinding export
on profitable rate.

Sweden keen to invest in energy sector:
Talking to Chairman, Federation of
Pakistan Chamber of Commerce & Industry Standing Committee on Diplomatic
Affairs on July 10, Ambassador of Sweden
to Pakistan Lars-Hjalmar Wide said that
his country has shown keen interest to
invest in energy and transport sectors of
Pakistan. He also said that Sweden could
prove a good market for Pakistani fruits,
vegetables, meat, leather, sports goods and
textiles if full potential is exploited.

Indian business leader for joint research
centre: Speaking at a meeting of Karachi
Chamber of Commerce and Industry
(KCCI) in Karachi on July 11, leader of
Indian trade delegation and former
President of Bombay Chamber of
Commerce and Industry, Ashok Kumar
Barat called for establishing Pakistan, India
Joint Research Centre to help develop
business, companiesâ&#x20AC;&#x2122; details and other
beneficial information, which will help
boost two-way trade. He suggested to the
business communities of both the countries
to approach their regulators and governments to formulate joint business policies.
LCCI asks for draft of trade policy:
Lahore Chamber of Commerce and Industry (LCCI) President, Irfan Qaiser Sheikh has
urged the Federal Secretary Commerce to
share the draft of the upcoming trade policy
with the chambers of commerce and sectorspecific associations to make it more
meaningful.
Traders concern on extortion incidents:
Traders on July 23 expressed grave concern
over the increasing number of extortion
activities, robberies, targeted killings and said
if the government cannot provide security to
the taxpayers it should resign.

APTMA asks for exemption from
loadshedding: All Pakistan Textile Mills
Association (APTMA) has urged the
government to exempt from loadshedding
the textile mills on independent feeders
and save workers from redundancy and
industryâ&#x20AC;&#x2122;s viability from erosion.

FPCCI urges rationalizing gas allocation: Federation of Pakistan Chambers of
Commerce and Industry (FPCCI) Vice
President Azhar Majeed Sheikh has urged
the government to rationalize the allocation
of natural gas to minimize the gas shortage
impact on the industry in the coming
winter. He said the government should
devise an effective policy to save the industry across the country which uses 15
percent of the total production.

Businessmenâ&#x20AC;&#x2122;s concern on law &
order: Business and industrial community have expressed concerns over the
poor law and order situation in Karachi
and demanded immediate intervention
of government to provide safety and
security to general public, business and
industrial community.

APTMA protests against loadshedding:
APTMA Chairman Mohsin Aziz, in his
meeting with the Prime Minister on July 25,
strongly protested against increase in
loadshedding to textile industry in a situation
when power shortfall had reduced substantially. He urged the government to resolve
power loadshedding to textile industry.

16

Mufti Irshad Ahmed visited Korangi
Association of Trade & Industry
office. In picture, Chairman KATI,
Ehtesham Uddin is seen presenting a
flower bouquete to Mufti Irshad Ahmed.
Govt. urged to facilitate ailing cottage
industry: The Lahore Chamber of
Commerce and Industry has urged the
government to facilitate the ailing cottage
industry to offset the financial losses it has been
suffering because of unprecedented and
unscheduled electricity loadshedding and
intervention by various provincial departments.
Political parties urged to share economic
agenda: Lahore Chamber of Commerce
and Industry on July 30 urged all political
parties to share their respective economic
agenda with the private sector for much
needed industrial and economic revolution.
Steep fall in bedwear export: Pakistan
Bedwear Exporters Association Chairman,
Shabir Ahmed said on July 30 that export of
bedwear experienced a steep fall of about $
600 million from $2.1 billion to $1.49 billion
compared to last year while a number of
bedwear units have closed down but unfortunately the Trade Development Authority
(TDAP) and the textile ministry have turned
a blind eye and have shown no concern
whatsoever to arrest this declining trend. He
suggested a roundtable conference of all the
stakeholders along with representatives
from ministries of finance, power,
commerce, and textile besides TDAP, FBR
and State Bank of Pakistan to find out the
way out to arrest the declining trend.
August 2012

E ditorial
The resolve that
has been dissolved

O

sector, sidelining even basic education, let alone imparting of
industry-specific vocational training, expansion and up-grading
of public transport sector (particularly the railways), and the
criminal neglect of basic health services despite a rapid rise in
Pakistan’s population.
Over the years what we developed were economic disparities that
kept escalating because the leadership remained focused on
serving vested interests, largely ethnic in nature. It was a process
wherein the middle class unwittingly took a share by keeping quiet
assuming that ‘the decent’ are obliged to quietly shun the corrupt, not
raise their voice against this lot. None of them seems to have
realized the fact that unwittingly, this was how they strengthened
the corrupt.
‘Unity’–the core principle enunciated by the Quaid–is now to be
found only in the books of history; in practice, it is a near redundant value. Proof thereof is the rising number of ethnic political
parties, which is the clear manifestation of a refusal to believe in
‘unity’, or in the concept of ‘one-nation’–the single biggest failure of
the Pakistanis as a whole.
The present government is fuelling this suicidal tendency by
legislating what it calls ‘devolution’ of power to the provinces, and its
commitment to create more provinces on linguistic and ethnic
bases. Indeed there is need for re-organizing the administrative
capacity of the state in view of the worrisome rise in Pakistan’s
population, but should this re-organization be based on ethnicity,
or on administrative logic? As for the devolution of power that has
taken place thus far, the common view is that it has been a failure
because it was illogical.
Devolution could deliver if the federation made the requisite
preparations–transfer one federally administered department at a
time, reorganize it to help it deliver even better, and then monitor
its performance to ensure the success of this grand experiment.
The pre-condition therefor was to prepare the provincial administrations for conscientious and optimal use of their new authority,
but because devolution was implemented without this preparation it
empowered those un-prepared for delivering.
Despite the failure of this experiment, the regime is hell bent on
expanding it. Not only that, it is creating more provinces on lingual
and ethnic bases. This aspect of the regime’s initiative strengthens
the argument that the idea is not to assure better governance but
destabilizing the state by fuelling ethnicity. A bigger tragedy is that
this disaster is the gift of a ‘democratically’ elected regime claiming to
hold the mandate of ‘180 million’ Pakistanis–a claim that became
suspect after the revelations by the Election Commission about the
authenticity of voting in the 2008 general elections.
Pakistan confronts a variety of threats and challenges to its
existence but, undeniably, it also has the potential to override them.
To do so, it needs to adopt and assertively practice the golden
principles–unity, faith and discipline– legacy left behind by its creator.
Ethnicity becomes a curse if it begins to over-ride other civilized
values. Unless we pledge to uphold merit, we won’t let the best
among us administer every sphere of life, and thus deprive the
nation of the benefits such an order could offer. By insisting on
completing its term, the regime is forcing the people’s miseries to
reach explosive dimensions.

n August 14, 1947 under
the leadership of Quaid-eAzam the new-born Pakistani
nation resolved to make Pakistan
one of the greatest nations on
earth by upholding justice,
shunning religious and ethnic
divides, optimizing the output of
the national resources, prioritizing merit, and so making Pakistan
an exemplary Islamic welfare
state. The Father of the Nation
wanted us to imbibe and practice
all these golden values.
As the nation celebrates its 66th
independence day, it is worth assessing to what extent we
succeeded in fulfilling the solemn commitments that we made to
ourselves 65 years ago; an honest reckoning shows that none of
them was met. Over the years, we sidelined these values, the
biggest tragedy being our gradual disintegration into splinter
groups.
This malaise (continuing to-date) was fuelled by state-created
inequalities on ethnic bases that developed in the early days of
Pakistan. The driving force therefor (till today) has been that
democracy empowers the corrupt aristocracy– the Rajas,
Nawabs, Khan Bahadurs (a title conferred by British rulers),
Sardars and Chaudhuries. Being inflicted by eternal political
short-sightedness, this lot with small, indecent, self-serving
ambitions again adopted its pre-partition culture of cronyism and
buried the principles of social equality, economic justice, above
all, merit, while assigning key state and administrative offices to
individuals.
Not surprisingly, these manifestly unfair policies denied East
Pakistan its fair share in national resources, especially in the
proceeds of jute exports–the East Pakistani crop that was then
the only commodity exported in a sizeable quantity to earn badly
needed foreign exchange. Wholly unfairly, bulk of the export
proceeds was used to build an industrial base in West Pakistan.
What added to this was the fact that, despite forming 56% of
Pakistan’s population, East Pakistanis were forced to agree to
being counted as 50% of the population.
How this gross injustice bore fruit, was proved by the events of
1971. Within 24 years of its birth, Pakistan was reduced to half its
size; the other half opted to become Bangladesh–an independent
republic. In the process, Pakistan suffered its most humiliating
military defeat, but the worst part was the ethnic strife that went
on for a year wherein thousands of innocent lives were lost for
which many still blame Pakistan although the victims were
Pakistanis from both provinces.
Besides this unforgettable failure, there were others whose aftereffects continue to bleed Pakistan–its participation in the ‘Jihad-eAfghanistan’, failure to reach a fair division of the Indus water with
India, neglect of building water reservoirs and generating hydroelectricity therefrom, equally criminal neglect of exploring energy
resources to achieve ever-higher levels of self-sufficiency in this

17

August 2012

E ditorial
Fair basis for quoting
yardstick interest rates

T

However, that isn’t the case, which reflects negatively on the
regulators. The banks being investigated in the Libor affair
are accused of not quoting ‘representative interest rates’. This
requires re-defining the term ‘representative rate’ and the key
question to be addressed is: what should be basis for a bank
to quote its rates for any currency, while acting as a member
of the panel that fixes yardstick rates, and how will regulators
cross check a quoted rate being ‘representative’.
The fault in Barclays’ Libor quotations was that they weren’t
high enough to reflect Barclays’ own reality i.e. cost of
funds. That being the argument, the basis for quoting such
rates has to be reflective of not just the cost of funds of a
bank and its operating expenses, but also inclusive of that
bank’s targeted return on equity. The only element that
should be excluded is the risk fact because the rate has to be
a zero-risk rate. The formula for calculating the rate has to
be defined clearly, and its calculation accordingly made
mandatory for all the banks participating in the yardstick rate
determination process. This is, theoretically, the logical way
of going about resolving the yardstick rate controversy but it
has its pitfalls because of the operational limitations of large
banks in developing states.
The formula implies that, the worked-out interest rate
should reflect a relationship between the sum total of the
annualized weighted average cost of deposits (excluding the
earnings on investment in statutory reserves), annualized
operating costs and the targeted return on equity as the
numerator, and that bank’s deposits (excluding non-earning
cash reserves lying in the central bank and average cash
holding in the branch net-work) as the denominator. The
rate so worked out would be truly representative of a bank’s
reality, which could thereafter be converted into rates for
various time periods by injecting therein the perceived
market risk in those time periods.
But the big issue is the capacity of a bank to know on a daily
basis its cost of deposits that could be annualized for being
used in the formula. Besides, there has to be a realistic basis
for estimating the annualized operating costs of a bank. The
next issue is the methodology and frequency with which the
regulator must cross check the accuracy of the figures used
by a bank to calculate its rate quotation. At present, in states
like Pakistan, it is a tough ask of both banks and regulators.
But every task remains impossible until an attempt is made
to undertake it, even if in parts, to begin with. Setting a fair
yardstick interest rate requires that this beginning is made.
Regulators must not overlook the fact that, at present, many
distortions reflect the unfairness of the yardstick rates. For
instance, the amazingly high spreads–reported by none
other than the State Bank of Pakistan–being earned by
banks show that banks are not quoting realistic rates for
determining the Kibor. While we keep pointing to the ‘high
cost of doing business’ as the impediment to growth in every
sector, we don’t realize that high interest rates are a part of
those high costs. Stake-holders must re-think the mechanics
of setting the Kibor.

he Libor bombshell that exploded in early July was the
end result of a year-long inquest by Financial Services
Authority (FSA) of the UK, and Department of Justice of
the US. This investigation was a tightly kept secret for understandable reasons–it could destabilize the confidence in
Libor–but its eventual disclosure had the same effect. The
worrying aspect of this debate is that, instead of correcting
their errors, banks and their regulators are focused in the
wrong direction.
On their part, governments are overly focused on punishing
the wrongdoers, not as much on quickly repairing the system
to revive market confidence, which is essential for what they
all want to achieve–economic revival. This reaction is partly
triggered by their own secret involvement in what the banks
were doing. But yardstick market-rates can’t be under clouds
for too long if economies are to be revived to register higher
growth, employment and social uplift. Nor can a bank with
global network be excluded from the processes of yardstick
rate determination just because some of its executives erred
in meeting their obligations cleanly; including such banks in
the rate determination process is imperative for working out
truly representative market rates.
Every day, dozens of yardstick interest rates are set in major
financial centres across the globe for a range of
currencies–a participatory discipline ensured by purposeoriented bodies–but the rates set in London and Brussels
are by far the most influential. Rates set in Tokyo are called
Tibor, those in Hong Kong the Hibor, and those in Brussels
the Euribor. For banks, being part of the rate determining
panels was once deemed a prestigious task, but now it is
tainted by growing suspicion of manipulation. "Any bank
that wasn't thinking about it would be foolish," said a
banker whose bank is a part of the Libor-setting panel in
London. He was hinting at getting out of the rate-setting
panel–a very irresponsible response to a scenario that
requires acting twice as responsibly.
For the moment, key officeholders in regulatory outfits are
focused on defending their roles in this gaffe; they all worry
about their own future prospects. There are even hints
about rivalries for rising to the next high post in their
central banks that are enticing them to undercut each other
in the on-going inquiry. Doing so, they overlook the fact
that, in some cases disclosures about their being prodded
into influencing rate quotations by the participating banks
had to do with advices from abroad than with voluntary
action. It shows how little they knew about what went on in
the banks they supervised.
While questions will continue to arise about the infallibility
of the mechanisms in use for determining Libor (and similar
yardstick rates in other financial centres) until now, the more
urgent issue is revamping and revising this mechanism since,
in the present era, when ‘floating’ rates of interest are
applied on loans of every type, availability of yardstick interest rates is imperative. This exercise should have begun
along with the investigations into the existing practices.

18

August 2012

E ditorial
Sovereign risk rating:
the slide gains speed

T

he latest shocker for the Pakistanis is a further downgrade of the country’s sovereign risk rating. From B3
until mid-July it has come down to Caa1, the short-term
rating remains at ‘Not-Prime’, and the ‘Outlook’ is negative.
As part of the rating downgrade, Moody's also revised
Pakistan's country ceilings. Foreign-currency country ceiling
was lowered to B3 from B1 while the foreign-currency
deposit ceiling was downgraded to Caa2 from B3, and both
local-currency bond and deposit ceilings too dropped to B1
from the earlier Baa2 and Ba2.
According to Moody’s latest report on Pakistan downgrading Pakistan’s risk rating, it was forced to take this action
due to:
• Deterioration in Pakistan's balance of payments in 2011-12
• Large repayments to be made to the IMF until 2014
• Pakistan’s dwindling ‘official’ foreign-exchange reserves
• Institutional weakness stemming from political instability
and constrained public financial resources
Coming from a non-partisan entity, this assessment of state
governance can’t be rubbished as the biased view of political adversaries–the regime’s usual response to anyone who
faults it for its flawed style of governance.
In Moody’s indictment of the regime, the downgrade of the
local-currency sovereign risk rating ceiling (reflecting
down-grade of the Institutional Strength to 'Very Low' from
'Low') has significant implications for even the domestic
lenders–banks–that have, so far, kept the wheel of the state
moving despite massive and largely visible waste of the
borrowed funds by the government. A well-experienced
banking sector analyst went as far as asking “will the
government repay the banks, and on time?”
Rumours are that the fiscal deficit may actually end up close
to 8% of the GDP (compared to 3.7% of the GDP, as
being claimed by the regime) once the FBR finally ends up
adding together the many components of the tax revenue
collected in 2011-12. As for the Current Account, during
2011-12, it registered a deficit of $4.517 billion compared
to a surplus of $214 million in 2010-11. Against its budgetary target of 0.6% of the GDP, trade deficit has been a
huge 2% of the GDP.
From the stand point of external debt servicing, the
shocker has been the 2011-12 trade deficit; at $21.801
billion, it is the highest-ever in the Pakistan’s 64-year history
because power shortfalls caused huge damage to the entire
economy. Every sector suffered, but the worst was the fate
of the industrial sector. Because of a substantial decline in
its output, not only did exports register a fall, more manufactured goods had to be imported pushing up imports to
their highest-ever level of over $44 billion.
How pervasive was the impact of the power-load shedding
is reflected in the fact that trade deficit in the goods sector
was up over 40%. With an increase of 55 percent or $1.07
billion, deficit of services sector reached $3 billion from
$1.9 billion. In external incomes sector while inflows amounted

to $820 million, outflows amounted to $4.227 billion. This
negative mix reflects on the competence as well as the vision
of the regime that insists on completing its term, come what
may. The only state office that foresaw the build up of the
trade deficit, though not as accurately as it should have done
was the State Bank of Pakistan that had predicted that the
deficit in 2011-12 could be between 1.5 to 2.5% of GDP. It
seems that these projections were set aside by the Finance
Ministry because no remedial action was initiated to contain
the trade deficit and its fallout, perhaps, because the regime
doesn’t a chance of its re-election in 2013.
The trade deficit in June 2012 has been $586 million. Were
it to continue building up at this pace, its year-end figure
could jump to $6 billion, or more. The big question is:
where are we headed? Is it towards a default by the sovereign? Moody’s cites the strained state of Pakistan's public
and public-sector finances and weak institutional arrangements that resulted in a technical default (in May 2012) by
the state-owned central power purchasing agency on
payment of arrears to private power producers–the
payments that were guaranteed by the state.
At June end, SBP’s gross international liquidity, including its
SDR holdings, had fallen to just $12.4 billion (foreign-exchange
reserves alone were $10.8 billion at the end of June). The aggregate
of repayments due only to the IMF in 2013-14 equal almost
half the current SBP reserve holdings. Impliedly, unless the
reserves are re-built, there is a possibility that either Pakistan
may cripple its economy by stopping even essential imports
like oil to repay its external on time, or default on its foreign
debt repayment commitments.
In the next two years, there is little hope of increasing
export trade at a healthy pace i.e. 20 to 30% rise annually,
given the fact that Pakistan’s export sector wasn’t encouraged to enter the less recession-stricken Second World
countries. With its continuing slump, European market
won’t grow quickly. The option that may help is to shift
exports to new markets, such as India, but what is crucially
important is attracting foreign direct investment to significantly increase foreign inflows.
There was a time when Pakistan could attract investment up
to $8 billion in a year but by 2011-12 its level fell to just $866
million. Undoubtedly, these flows were expected to drop
due to the global recession but not as much if Pakistan was
being governed well in terms of sustained power and
energy supply at a reasonable cost, law and order chaos
didn’t interrupt any economic activity, and market regulation improved to assure foreign investors a secure environment, at least at par with, say, India, Sri Lanka and Bangladesh, if not better.
None of these key drivers of the economy was a priority of
the in-power regime from day-1. This quality of focus could
lead to no better results except downgrade of sovereign
risk; for the in-power regime, it is too late to strive for a
reversal of its indictment. A change alone could restore
confidence.

19

August 2012

E ditorial
London Olympics:
the challenges they pose

A

fter a four-year preparatory effort, Olympic Games
began in London on July 27. During this period, a
huge amount of resources went into building a variety of
stadia for the many events of the Olympics. Prime Minister
David Cameron had earlier hinted that the three-week long
Olympics were going to be a $20 billion bonanza, but
(according to The Economist) in the decades beginning
1960, Olympics proved financially unproductive for the
host countries due to cost overruns and the present Olympics in Britain (that Joined the US and Nato in several
controversial invasions of Muslim states in the last two
decades) also face a serious security threat.
Yet, until virtually the last minute, the security arrangements
remained a question mark because of the confusion created
by the private security agency that was hired by the British
Olympic Committee. The security agency G4S, said it can’t
provide the full security force of 10,400 guards at the games
venues forcing the British Defence Ministry to mobilize an
extra 3,500 soldiers and raised the contribution of the
armed forces to 17,000.
Days before the games actually began a looming possibility
was, that if the security firm failed to recruit a minimum of
7,000 multi-national and multi-lingual security guards, 2,000
more troops may be required. Despite this confusion
Culture Secretary Jeremy Hunt reiterated government
assurances that the games would be safe in London, where
civil disturbances last winter had paralyzed life for days.
While he was promis-ing safety not just to Londoners but
to thousands of visitors from abroad, came another
shocker; on July 19, Aslef, union of the railway workers,
announced that 450 of its members in central England
would walk out between August 6 and 8 in protest over a
dispute concerning their pensions.
Along with the threat by Aslef, came the announcement by the
border officials to go strike on July 26, a day before the start of
the Games. This threat held the potential of delaying
thousands of visitors arriving for from abroad. The unusually
wet weather also threatens to dampen the spirits of the event
organizers as well as the potential audience. The wet weather
has earned the Olympics the nickname of “Soggy Olympics”.
This was hardly the kind of setting that could encourage the
foreigners–the source of huge financial inflows into Britain
from their stay in London to watch the Olympics. The attack
on Israeli tourists in Burges on July 18, while travelling to the
city’s airport, served to revive the memories of the July 2005
suicide attacks on London’s transport system by terrorists in
which 52 people were killed. But Hunt was sure that Britain’s
“extremely competent intelligence services” were capable of
responding to any such threat. Let’s hope he is right.
The developing scenario also revived the memories of the
1972 Munich Olympics. Then, the Palestinian group ‘Black
September’ had attacked Israeli athletes participating in those
Olympics. On September 5, 1972 terrorists from this group,
armed with Kalashnikov rifles and hand grenades, stormed
the quarters of the Israeli squad killing two squad members

and taking hostage another
nine. The terrorists then sought
the release of Arab prisoners
and their own safe escort back
to an Arab state–Libya. Later,
all the nine hostages and their
five captors were killed when the German police carried out
a botched rescue operation.
These developments scared the British Premier who was on
a visit to Afghanistan. While he did not refer to the looming
security threat, he called the strike threat by railway workers
unjustified and said that “I would strongly counsel the union
thinking of disrupting this very important period. I think
they (the unions) would lose huge amounts of public support
if they really tried to do this.” He also said that it’s a moment
when Britain should show its best face to the world, and that
is what the vast majority of the public wants. Indeed that is
what the British civil workers should be doing but the after
effects of the recessions have made their lives pretty difficult
forcing them to seek better terms of service.
In a period of pervasive frustration caused by rising layoffs,
and consequent unemployment, events that encourage huge
public gatherings are prone to becoming forums for
express-ing popular dissent, which can become violent–a
reality that we experience everyday in Europe. The ‘Occupy’
movement that began in the West is the outcome of this
state of affairs. London Olympics may afford the opportunity this popular movement needs, to express the frustrations of the masses over the way governments have
managed their economies in the past decade heralding the
ongoing economic recession.
A section of the British media is also expressing its doubts
about the Olympics being economically productive in terms
of generating a surplus over the public funds invested in the
infrastructure created for the Olympics. That London is
now one of the most expensive cities in the world is a grim
reality. Besides security fears, London’s being expensive is
another restraint for the foreigners at a time when savings
have gone down globally; travelling to London to watch the
Olympics doesn’t seem an attractive idea to many even in
the much less recession-stricken East Asian countries.
Holding the Olympics at the present time is a challenge for
any state that is involved in military actions that are seen to
be part of the highly discredited ‘war on terror’ and partisan
direct (in Libya, Iraq and Afghanistan) and indirect (in Syria)
military action in the Middle East. It is no wonder that travel
agents and hotel and motels in London have not received
the response they were expecting from the foreigners in
terms of travel and hotel bookings. Put together, these
aren’t the signs the organizers of the Olympics anticipated.
But Olympics are the venue for the world’s sportsmen and
women to assemble in one place and exhibit the best of their
talents; it mustn’t be marred by man-made tragedies because it
is an opportunity for all the nations to forget, at least for a while,
their political rivalries and join hands for a good cause.

20

August 2012

E ditorial
Of the coalition’s
full term in office

N

What none in the coalition parties seems to realize is the
fact that one more year in power (unless it is used to prepare
for escaping abroad with the wealth amassed while in
power) is by no means enough time to make amends for the
coalition parties’ gross misconduct during their tenure in
office. They have done irreparable damage to the country’s
economy and its unity, courtesy the so-called devolution of
power, which is a mere deception if the state can’t muster
the resources that would be needed by the provinces to
deliver results.
Not a day passes without the media reporting waste of state
resources, their being embezzled or being pocketed by a state
functionary. The sums involved in these cases over the past
four-and-a-half years add up to trillions, which is reflected in
the fact that public debt more than doubled during the term
of the coalition government. If one asks what those funds
did because nothing improved, the regime’s pet response is
“don’t you know the world is in a recession?”
The regime’s over-optimism about the masses’ lack of
know-ledge about what goes on has been its biggest blunder, since the media is far more alert and informative than
in the 1970s or the 1990s. People may not know precisely
how national wealth was squandered away but they know
that that’s what the regime did. What makes the regime’s
case worse is the fact that it always tries to balance supply
shortfalls by price hikes without any concern about is
impact on the ordinary.
Until now, Pakistani history was devoid of instances of price
rises with retrospective effect. It is a common practice now –
one that lacks both legality and morality but does not bother
the government. In fact, such increases in the power generation sector have government sanction although, in a scenario
of rampant inflation, retrospective price increases imply that
people pay out of savings that they no longer have. Yet, the
regime claims that it is a peoples’ regime and has their mandate-it is a sick joke that brings tears to your eyes.
That democracy never delivered results in Pakistan is now
an undeniable reality. The reason is that has it always
elevated to power the corrupt landed aristocracy of
Pakistan. This class has petty, self-serving ambitions, not a
desire to do anything memorable for the benefit of the
country. That it is the case is proved by the fact that (except
a few in the pre-partition times) no landlord ever thought
of setting up even a primary school from his resources, let
alone do anything memorable in this context–set up a
college or hospital;. Contrary, thereto the latest is that 8,000
ghost schools exist on official records.
Each time democracy descends on Pakistan, two-thirds of its
suppressed electorate is forced to vote the landlord class into
power. This class rips the country, and when it is threatened
with expulsion, its stalwarts complain that they weren’t given
enough time to put things right. Well, the incumbent regime is
close to completing its term, but what did it do? Didn’t it make
this country worse off in every way including its image
abroad? Didn’t it do that more recklessly than ever before?

ever before in Pakistan’s 65-year history did you
witness the kind of executive-judiciary confrontation
being witnessed now. The President, Prime Minister, federal
and provincial ministers, and parliamentarians of the coalition parties, have set new records of defying the judiciary.
All this goes on in the name of supremacy of ‘democracy’
and ‘unquestionable’ mandate of the parliament. Effectively, the parliament is now claiming a ‘divine’ status, since
it considers itself beyond any accountability.
Ridiculous as it is, this stand could have a shade of legitimacy had the parliament delivered on any of its promises in
reality, instead of spending four-and-a-half years only on
amending the constitution. That initiative only escalated the
chaos, not deliver practical results since requisite administrative changes in these setups in the provinces (that could
ensure delivering better results) were not envisaged while
devolving power to the provinces.
Other than the controversial amendments to the constitution that devolved power to the provinces and forbid state
office-holders’ accountability by the judiciary, there is little
that the regime in power can cite as its achievements. Power
shortfall has virtually paralyzed the country’s economy,
street protests are making it worse, and the non-existent
enforcement of the law is manifested by the daily target
killings that go on day in, day out.
While the Supreme Court has given the new Prime Minister
until August 8, to write to the Swiss Courts to re-open the
money-laundering cases pending against the President,
what is highly likely is that, like his predecessor, the Prime
Minister will refuse to comply with the court instructions
and create another legal crisis of the ultimate magnitude. If,
however, he decides not to become another Yusuf Raza
Gilani, he could request the court to wait until the next
elections – an option that the court had given the previous
Prime Minister.
While it would be odd to accept this response to the
court’s instructions (that effectively amounts to contempt
of court), the court may accept this plea, provided the
Prime Minister also commits to call early elections. But
rumour has it that coalition partners are busy discussing
another amendment to the constitution whereby the term
of the sitting parliament could be extended by a year.
Reportedly, the inspiration for this amendment comes
from the fact that, in 2013, the Chief Justice of the
Supreme Court and the Chief of Army Staff are due for
retirement.
It would be no surprise if the sitting parliament does
legislate to extend the term of the sitting parliament; with
the almost reckless majority the coalition enjoys, it can do
anything, as it has proved thus far. The coalition partners
know very well that given the way they have administered
the state in the last four-and-a-half years, they need the
security provided by the state because without it, they could
be taken to task by over 80% of the population, and that
too in a ruthless manner.

21

August 2012

Awan Trading Co.

is Pakistan based
Coal trading entity which was incorporated in
the year 2002. The company started its
operation as an importing company and for
the last two years it has also started supplying
domestic coal (Pakistan coal). So far the
company has imported and supplied 5 million
tons of coal, from South Africa and Indonesia,
to the cement factories.
This opportunity of supplying coal to cement
factories was created due to their (Cement
factories) shift from furnace oil to coal as the
main energy fuel. Since then the company
has been sincerely committed in its mission of

supplying coal to factories as a source of
energy. What you sell is important! So we
source our Coal from best suppliers around
the world. Developing longterm relationships
has been the hallmark of our company. Our
promise that â&#x20AC;&#x153;we deliver, no matter what the
situationâ&#x20AC;? has earned us, the confidence of
our buyers.
The success of our trading can be gauged
from the fact that we are now importing 21
vessels (1 million ton) of coal in a year which
as resulted in 30% market-share for Awan
Trading Co and hopefully the share will
increase in the coming years.

P olitics
Techno-war: the
deadly invention
critical nodes devoid of
all moral values that can
be defeated simply by
identifying and physically destroying them–
is the doctrine that has
been evolving and becoming more extreme
since the development
of ‘daylight precision’ US Airforce pilot controlling drone
that is evolving and
turning more ruthless since the ‘strategic’ bombardment doctrine
was evolved by the US Army Corps during WW-II.
Now, in Pakistan, the critical nodes are Taliban and al Qaeda
leadership–both creation of the US. The center of the theory
of techno-war is a comforting idea that precision bombing
(in WWII, via technical wizardry of the Norden ‘bombsight’
and the ‘blind’ bombing systems like the H2X radars), could
enable America precisely attack ‘military targets’ deep inside
hostile territory, and avoiding destruction of civilian lives and
property. In fact, its proponents claim, absurdly as it turned
out, that daylight precision bombing can save lives by obviating the need for a land invasion.
Drones, coupled with precision guided weapons have helped
evolve this mentality into a new level of recklessness because
its gripping effect on American psyche further disconnects
the killer (sitting thousands of miles away) from the outcome
of the killer’s actions. The killer’s clinical detachment creates
an illusion– that war is cleaner and easier to wage and civilian
casualties become morally acceptable as the good intentioned
accidents. The term ‘collateral damage’ says it all. The report
by Cloud ended by listing American apologies, and financial
payoffs to the survivors of the civilians inadvertently killed –
although, given the emptiness of the ‘dialogue’ he revealed,
Cloud’s idea that deaths are collateral damage by a ‘precision’
killing machine sounds bizarre.
The illusion of techno-war is soothing to generalissimos like
Clinton, Bush, and Obama, and accompanying video games
provide a distraction to the Americans being impoverished by
government policies that re-distribute wealth to the super
rich. Besides, by making war at a distance easier to prosecute
and painless for Americans (at least, for now), the fallacies of
techno-war set the stage for America’s remaining in a state of
perpetual war. Continuous wars, or threat thereof, help prop
up the sclerotic military-industrial-Congressional complex
built during the cold-war era, and create unending demands
for high-tech, war-winning products–without that America
can’t sustain its clout as the lone ‘super power’.
Besides, it also helps redistribute wealth to the war-machine
backing rich class. That’s why, every time the techno strategy
fails to deliver, as it often did–Korea, Vietnam, the two Iraq
wars, Kosovo, Afghanistan, and then in Libya–the focus is
not on the ‘lessons learned’; it is on recommending a higher
outlay on devising more destructive war technology–sensors,
guidance gadgetry, command, control, communications, and
intelligence systems.

Following is the summarized version of an article authored in April 2011,
by Franklin “Chuck” Spinney, a former military analyst for the Pentagon.
The facts he has collected are both amazing and frightening. The part that is
shocking is that techno-war – devoid of any moral sense – has had the
blessings of the White House residents, one after the other since WW-II.

L

ast year, on April 22, US Defense Secretary Robert Gates
announced that President Obama had approved initiation
of drone strikes in Libya. Vice Chairman of the Joint Chiefs of
Staff, Gen. James Cartwright later claimed that drones were
‘uniquely’ suited for attacks in urban areas because they can fly
lower and get better visibility of targets compared to a pilot's
eyeballs. Gates went on to claim that drone strikes in Libya
would be carried out for ‘humanitarian’ reasons.
In effect, they sold Barack Obama the idea of Pakistanizing the
Libyan War i.e. pursuing a military strategy of relying on drone
attacks to destroy an adversary hiding in the environ- mental
backdrop. The astonishing fact was that Obama fell into the
trap despite the fact that, 12 days earlier, a report in the Los
Angeles Times by David Cloud illustrated yet again the absurdity
of the claims made by Cartwright and Gates.
Cloud's report is worth reading. Quoting actual transcripts of
conversations among drone operators, Cloud revealed the
sinister psychological effects the so-called techno-war has on
American soldiers. Their sterile dialogue vividly showed how
the idea of precision techno-wars fought from a safe distance
desensitizes the American ‘warriors’ to the bloody physical
effects of their actions on the people they are maiming and
killing and the assets they are destroying. There is no bravery,
soldierly honor or a spirit of self-sacrifice among the drone
operators safely ensconced in Nevada; they are just cogs in a
dysfunctional dehumanizing machine. This is revealed by the
total absence in their dialogue of a psychological appreciation
of their ‘adversary’. Consider, for example, the emptiness in
the following dialogue reported by Cloud:
While the drone operators in Nevada guided a drone to hit a
reported bunch of terrorist somewhere in Afghanistan, those
Afghans were unfolding what looked like blankets, and then
kneeled in prayer. "They're praying. They are praying," said the
predator's camera operator, seated near the pilot. By then [that
is after clearly seeing that the Afghans were praying] the predator crew was sure that the men were Taliban. "This is definitely
it, this is their force" said the cameraman. "Praying? I mean,
seriously, that's what they do [i.e. carry out terrorism in prayer].
[Now] they're gonna do something nefarious," the crew's
intelligence coordinator chimed in.
Lack of inquisitiveness into the mind of the enemy is in stark
contrast to Pentagon's subtle psychological appreciation of its
domestic adversaries, which has been hugely successful in
waging and winning its budget battles to extract money from
the American people. Extreme psychological one-sidedness on
America’s side is nothing new in its military operations. It
has been the central feature of the American way of technowar for a long time. Indeed, the theory about the adversary
being merely a physical set of targets – a dehumanized set of

23

August 2012

P olitics
The ‘Longest War’:
overcoming lies and indifference

I

by Kathy Kelly

Kathy Kelly
n April of 2003, I returned from Iraq after having lived
is the Co-coordinator of the Chicago-based
there during the US ‘Shock and Awe’ bombing and the
Voices for Creative Nonviolence, a movement
initial weeks of the invasion. Before the bombing I had
dedicated to ridding the world of wars as the route to
travelled to Iraq about two dozen times and had helped
resolving disputes
organize 70 trips to Iraq, aiming to cast light on a brutal
sanctions regime, with the ‘Voices in the Wilderness’ campaign. following Shock and Awe, the war and its effects had killed
As the bombing approached, we had given our all to help- upwards of 660,000 Iraqis. This credible report, backed by
ing organize a remarkable worldwide peace movement prestigious academic institutions, had been ignored by the
effort, one which may have come closer than any before it, government, and thus also by the media, allowing a disinterto stopping a war before it started. But, just as, before the ested public to avoid learning information they'd mostly been
war, we'd failed to lift the vicious and lethally punitive careful not to ask for. In his book, Tirman was now trying to
economic sanctions against Iraq, we also failed to stop the understand how the U.S. public could have been so indifferent.
war, and the devastating civil war that it created.
His eventual explanation focuses on how hard U.S. war
So it was April and I'd returned home,
planners (and war profiteers) have
devastated at our failure. My mother ‘Voices for Creative Non- worked to overcome “the Vietnam
possessed ample reserves of Irish charm, violence’ tries to assist in Syndrome,” which is to say the healthy
motherly wisdom, and, for purposes of
democratic rejection of the Vietnam
educating the general
political analyses, a political analysis
War, which authorities across the
consistent with that of Fox News Chan- public about people who liberal-to-conservative spectrum have
bear the brunt of our
nel. She knew I was distraught and,
tended to see as a sort of disease to be
aiming to comfort me, she said the
wars – so we travel to
eliminated. The inoculation campaign
following in her soft, lilting voice. “Kathy, war zones and live along- had been very effective: By creating an
dear, what you don't understand is that
all-volunteer army, by carefully regimentside ordinary people,
the people of Iraq could have gotten rid
ing and ‘embedding' reporters and
of Saddam Hussein a long time ago, and trying, upon our return, to relentlessly emphasizing “humanitarthey ought to have done so, and they get their stories through ian” goals to be achieved by any exercise
didn't. So we went in there and did it for to ordinary people in the of our power overseas, the US militarythem.” She clearly hoped I could share
industrial complex has been able to
US. We hope that by
her relief that the US could lend a
assure that the majority of US people
helping hand in that part of the world. doing so we can eventu- won't rise up in protest of our wars. If
“And they ought to be grateful, and
ally help motivate civil
the public can be persuaded that a war
they're not.”
is essentially humanitarian, Tirman
society into action to
believes their indifference can be counted
My mother, then in her eighties, was
oppose
these
wars.’
on, in spite of the number of US
actually quite anti-war, but she was also
against evil dictators, and the governance of any country soldiers killed or maimed or psychologically disabled by their
where she was consistently told we might need to invade. If a wartime experiences, regardless of the drain on US econowar could be packaged as necessary to achieving humanitar- mies, however stricken or depressed, and without any apparent
ian goals, then my mother would almost certainly join the concern for or even awareness of the horrendous consemajority of US people, over the past decade or so, in tolerat- quences borne by the communities overseas that are the
ing wars or at least enduring them with a general indifference targets of our massively armed humanitarianism. Adding to a
to any accounts of the human suffering the wars might cause. predisposition on behalf of saving people from evil dictaAlthough the war in Afghanistan is often referred to as the tors, the US population and that of many western allies
longest war in U.S. history, the multistage war in Iraq, begin- face declining availability of jobs. Available jobs are
ning in 1991 and inclusive of 13 years of continual bom- increasingly controlled by either the military-industrial
bardment and nightmarish, generation-wasting economic complex or the prison (criminal justice) industrial complex.
warfare waged through military-enforced sanctions, consti- A few years ago, many people disenchanted with the Iraq
tutes the longest war, one which in real terms is of course and Afghan wars placed hopes in Obama as someone who
would uphold the rule of law, including the international
ongoing.
laws, ratified by US congresses past, against international
John Tirman, of the Massachusetts Institute of Technology, aggression and war crime, ending those abuses by the US
attempted, in his book The Deaths of Others, (Oxford Univer- military, its private-sector contractors, and the CIA, which
sity Press, 2011), to understand how US people could be so have contributed so to worldwide hostility against the US
indifferent to the suffering caused by US military actions. and have arguably so greatly lessened our security. But the
He was following up on his seminal study of Iraq war Obama administration, in its de facto continuation of both
casualties, released by John Hopkins and printed in The wars, in its massive escalation of targeted assassinations worldLancet, which had concluded that in the three and a half years wide and its secrecy about drone warfare against Pakistan,

24

August 2012

P olitics
discussing, in all manner of public discussions, the fundamental unfairness of systems designed to benefit small
elites at the expense of vast majorities; and the OWS movement welcomed anyone and everyone into solidarity in
building towards more humane, more just, and more democratic communities. The peace movement should participate in and encourage this remarkable network, and similar
organizations that will spring up to complement it, not only
to demand more jobs and better wages but also to stipulate
what kinds of jobs we want and what kinds of products we
want those jobs devoted to creating. We must campaign for
jobs that build our society instead of converting it into junk
– that produce constructive and necessary goods and
services and above all not the weapons that we employ in
prisons and battlefields at home and abroad.
We must think hard about ways to democratize our country,
and reverse the “unwarranted influence” over our society
which, half a century ago, a Republican president was warning us already belonged to the military industrial complex.
Enormous sums of money, along with human ingenuity and
resources, are now being poured into developing drone
warfare and surveillance to be used abroad and increasingly at
home, but the more intelligence our leaders collect, the less
we, the led, have access to. The drones aren't there to help us
understand the Afghan people – how they huddle together
on the brink of starvation, dared to survive the capricious
and uncivilized behaviour of a nation gone mad on war. Have
we any means of imposing civilization, not on desperate
people around the world, but on those who lack it - the elites
that control our military, our economy, and our government?
And honestly, I couldn't persuade my own mother. I should
admit here to a recent conversation with my sisters, the
oldest of whom recently shared, “We weren't sure whether
or not to tell you, but mom really did hope you were working for the CIA.”
We never know how we will influence others and what
unexpected developments might happen. The destiny of a
world of seven billion people should never be shaped by a
few activists – as it currently is shaped by a remarkably few
activists occupying the US Pentagon, our business centres,
and the White House. We're not supposed to make any
change we can securely claim credit for – we're supposed to
do good for the world – to speak truth to it, to resist its
oppressors, to surprise it with decency, love, and an implacability for justice; and trust it to surprise us in turn.
With eyes wide open, willing to look in the mirror, (I'm
drawing from the titles of two extraordinarily impressive
campaigns designed by the American Friends Service Committee), we must persist with the tasks of education and
outreach, looking for nonviolent means to take risks
commensurate to the crimes being committed, all the while
growing ever more open to links with popular movements
and respectful alliances well outside our choir. We must
civilize the world by examples of clear-sightedness and
courage. We're supposed to do what anyone is supposed to
do; live as full humans, as best we can, in a world whose
destiny we can never predict, and whose astonishingly
precious inhabitants could never be given enough justice, or
love, or time.

has repeatedly shown our government's unshakeable allegiance,
to militarists and those radically right-wing advocates of corporate power we're often now asked to call “centrists”.
I think, we, in the peace and antiwar movements, find ourselves stalemated. Groups are outspent and out-manoeuvred by
military and corporate institutions with power to undercut
whatever “clout” our movements might have developed because
these two complexes have now arrogated so much antidemocratic control over the media and the economy. Nonetheless,
grassroots groups persist with arduous and often heroic
efforts to continue educating their constituencies and reminding ordinary people that the defence industry is not providing
them with any of the security that it assuredly isn't providing
for people trapped in our war zones.
What direction should the peace and antiwar movements
pursue now? Now, when it seems difficult to point toward
substantial possible gains? Now, as the US continues to wage
multiple wars and build on a weapons stockpile that already
exceeds the combined arsenals of the next most militarized
eighteen countries on Earth? In advance or in retreat, we have
to keep resisting. Surely, we must continue basic “maintenance” tasks of outreach and education. ‘Voices for Creative
Nonviolence’ tries to assist in educating the general public
about people who bear the brunt of our wars – so we travel
to war zones and live alongside ordinary people, trying, upon
our return, to get their stories through to ordinary people in
the US. We hope that by doing so we can eventually help
motivate civil society into action to oppose these wars. But
while working to preserve the heart of the society, its civilization in the best meaning of that term, we know we must
always organize for and participate in campaigns designed to
have the greatest possible impact on policymakers now, and
through them on those whose lives are so desperately at stake.
That commitment in turn is part of our message to our
neighbours to reclaim their humanity through action.
It's not just each other's hearts, but also each other's minds
that citizens of a democracy are called upon to exercise. We
must constantly appeal to the rationality of the general
public, engaging in humble dialogue so they can appeal to
ours, helping people see that US war making does not make
people safer here or abroad, that in fact we are jeopardized
as well – if only by the intense anger and frustration caused
by policies like targeted assassination, night raids, and aerial
bombings of civilians.
We should celebrate the tremendous accomplishment of
Occupy Wall Street. In just twelve weeks the “99 and 1”
logos reintroduced people, worldwide, to the normalness of

25

August 2012

P olitics
Contempt of Court Bill-2012:
an attempt to silence the judiciary?

T

he five-member bench of the Supreme Court, headed by
the Chief Justice of Pakistan, Justice Iftikhar Muhammad
Chaudhry, has annulled the new Contempt of Court Law 2012
which, as generally perceived, aimed at immunizing the ‘public
office holders’ from judicial scrutiny, and, as the apex court held
in its 21-page short order, it was clearly ‘an attempt to reduce the
powers of the court.’ After hearing 27petitions on the subject for
ten days, the apex court observed that the judiciary had never
claimed supremacy over other organs of the state but it had a
duty to interpret the constitution and the law. The court noted
that by enacting the Contempt of Court Law 2012 in pursuance
of Clause (3) of Article 204, read with Entry 55 of the Fourth
Schedule to the constitution, an attempt had been made to reduce
the powers of the court. The court, therefore, declared the law as
unconstitutional and void. The Court also revived the Contempt
of Court Ordinance 2003 w.e.f. July 12, the day when the new law
was enforced.
The Parliament had passed the new law last month following
conviction of the former Prime Minister Yousuf Raza Gilani
for refusing to obey the Supreme Court’s orders to write letter
to the Swiss authorities to reopen corruption cases against
President Asif Ali Zardari.
The Supreme Court’s verdict striking down the new law was not
something unexpected. The way the law was got through gave
an indication that it would be struck down by the court. ‘This law
was destined to be declared void the moment it was assented to
by the president,’ commented Advocate Rana Waqar who
authored one of the 27 petitions that challenged the new law.
The government had succeeded in having the controversial
“Contempt of Court Bill-2012” passed by the National Assembly on July 9, endorsed by the Senate just two days thereafter,
and signed into law by the President the same evening, despite
the opposition’s protests, walkFair comments out and warnings that the new
on the general legislation would be ‘shot down’
working of
by the court. Surprisingly,
courts made in though, the top leadership of
the opposition, especially of
good faith in
PML-N, was conspicuous by
the public
absence from the National
interest and in its
Assembly session on this imptemperate
ortant occasion lending strength
language shall to the perception about them
not come under being the ‘friendly opposition.’
the contempt
Laws, all over the world, are
of court.
made for the overall good of
the people, not for the benefit of ‘certain individuals’; in the
latter case, the laws lose their credibility. Interestingly, however,
the Contempt of Court Bill-2012 was generally considered as a
calculated person-specific move of the treasury benches since it
sought to exempt the holders of public office from trial and
prosecution for contempt of court in ‘exercise of powers and
performance of functions of their respective offices’. According to the new law, the president, the prime minister, provincial
governors and the chief ministers, federal and provincial
ministers, and ministers of states were not to be held answerable

by Jauhar Ali

to any court for the exercise of powers and performance of
functions of their respective offices under clause (1) of Article
248 of the constitution, for any act done or purported to be
done in the exercise of those powers and performance of those
functions.
Surprisingly, the bill was reportedly claimed to have been
adopted “unanimously” although there was no mention of the
exact number of parliamentarians who supported or opposed
the move. But two PPP stalwarts, Senators Aitzaz Ahsan and
Mian Raza Rabbani had openly expressed their reservations
against the contempt law, pointed out its flaws, and said that the
Supreme Court could partially strike it down. The leader of the
opposition in the Senate, Senator Muhammad Ishaq Dar called
the Bill ‘the result of mala fide intention and a slap on the face
of parliamentarians’. He alleged that the House was being
bulldozed by the government in total disregard to rules and
procedures. In particular, Babar Awan made a severe dig on the
Law Minister, Farooq H. Naek when he said that the contempt
law had been prepared by the same “munshi” who had
authored the NRO, which could not stand the judicial scrutiny.
An interesting clause incorporated in the bill was that ‘fair’
comments about the general working of courts made in ‘good
faith’ in the public interest and in ‘temperate language’ would
not come under the contempt of court. Also, a true averment
made in good faith and in temperate language for initiation of
actions or in the course of disciplinary proceedings against a
judge before the chief justice of a high court, the Chief Justice
of Pakistan, the Supreme Judicial Council, the federal government or a provincial government would not amount to
commission of contempt of court. There was no mention,
however, as to who would judge the actions being “fair” or “in
good faith?” The question remained un answered.
Having been legislated at a time when the cases of the PPP leadership about contempt of court were being heard in the Supreme
Court, the new law was increasingly being perceived as a black
law, a direct aggression on the judiciary, a move that could
intensify tension and confrontation between the government and
the superior judiciary, an attempt to create a privileged class of
leaders exempt from answerability to any court, and, more importantly, an apparent design to save the new Prime Minister Raja
Pervez Ashraf from meeting the fate of his predecessor Syed
Yousuf Raza Gilani. “It is a black day in the history of the parliament as the bill is direct aggression against the superior judiciary,’
said PML-N leaders Khawaja Saad Rafique and Khurram Dastgir.

26

August 2012

P olitics
Observance of the rule of law is the key to progress. This
perception has world-wide recognition. The problems confronting
different nations in Africa,
The Constitution Asia, and the emerging demoempowers the cracies are far from identical.
Supreme Court However, it is generally acceptto strike down ed that, if progress is to be
achieved, it is necessary to
any law which
improve the observance of
encroaches
the rule of law. Seen in this
upon the
context, the bill that sought to
constitutionally create a class which was above
the law, could only be perceived
guaranteed
regrettable especially at a
basic rights of as
time when the Supreme Court
the citizens
had already sought the prime
minister’s response on implementation of the NRO case
requiring him to write to the Swiss authorities to reopen graft
cases against President Asif Ali Zardari.
The Law Minister had said that the government respected the
judiciary and that there was nothing in the Bill to offend the
apex court or infringe upon its authority. That being so, it is not
understandable as to what else was the rationale for framing and
promulgating the new law which, according to the Chief Justice
of Pakistan, was a replica of the Contempt of Court Act 1976,
barring a few clauses. The haste with which the bill was
legislated and the assertions made in defence thereof apparently
pointed to the underlying intentions and lent strength to the
view that the move was an attempt to tie the hands of the
judiciary, disgrace it and clip its independence.
This Bill also conveyed a message that defiance of the law by
the top state officeholders was no longer to be considered as an
offence, and encouraged them to run the state regime without
any fear of accountability. This could clearly be seen through
the tirade of two PPP parliamentarians, Noor Alam Khan and

Jamshid Dasti, on the role of the judiciary, just a day after the
passage of the new law by the National Assembly. They came
out hard on the role of the judiciary, questioned the impartiality of the Chief Justice of Pakistan, and asked why the apex
court had not taken suo moto notice of the several casualties
in Punjab in the wake of the strike by young doctors.
Recently, addressing a ceremony of newly-enrolled advocates
for the Supreme Court at the Karachi registry, the Chief
Justice of Pakistan had spoken his mind. He said that the
apex court was empowered to strike down any law which was
in conflict with the Constitution. “The Constitution embodies the will of the people and empowers the Supreme Court
under Article 8 to strike down any law which encroaches
upon the constitutionally-guaranteed basic rights of the
citizens”, the Chief Justice observed while referring to the
misconception regarding the supremacy of the parliament.
The message was loud and clear, at least to most legal experts
who were of the view that the Supreme Court would not
look at the overhauled contempt of court law favorably.
It is to be seen as to what is going to be the next move of the
government now that the Supreme Court has declared the
whole law as ‘unconstitutional, void and non est.’ All that has
come forth so far is that the heads of allied parties, in their
meeting held following the verdict of the apex court,
expressed the resolve that the right of the parliament would
be upheld and this right would not be allowed to be compromised, no matter what the odds and the cost. This apparently
points to a possible trend of confrontation between the
executive and the judiciary. It would be only unfortunate if
that happens. Given the internal and external challenges
facing Pakistan, there is need to have political-judicial
restraint. It is high time the politicians, the judiciary and
everybody else must sit together, think coolly and jointly
evolve some sort of a formula that could take the country out
of the impasse.

eather pundits of Pakistan are
now reversing their forecast about
higher rain this monsoon compared to
the 2011 monsoon; they say that rainfall
could be far less compared to last year.
This trend now seems universal because
the same is the case with the US. In fact,
in the US, 2012 could be driest year in the
last five decades. Same is the case in India,
China and Russia. Despite the massive
damage rain has caused in recent weeks in Beijing’s mountainous Fangshan region and south western Sichuan province, rain
was welcomed in a drought-prone northern China which suffered
from a lack of rain over the last decade.
According to Xinhua, in Fangshan district, it rained for over 14
hours – the longest spell since records began in 1951. In
Beijing, some areas experienced 18 inches of rain and on the
capital’s central second ring road flooding was up to 3 metres
(10 feet). Rescue workers were repairing damage caused to the
city’s infrastructure and had to drain over a million cubic metres
(35 million cubic feet) of water from the city’s sewer system.
The rainstorms–most severe after 60 years–led to the evacuation of more than 50,000 people in the capital, mostly from
Beijing’s outlying mountainous districts, and resulted in the
deaths of 37 residents.
But the fact that more rain has been forecast in the northeast
and southwest of China was a relief for China’s government
because it could result in higher crops and help bring down the
food inflation that has soared to worrisome heights. The fact,
however, is that China may still be short on food supply
because rains have been late, and the predictions about rains in
the next few weeks may not materialize because this year that is
the trend in many countries, the worst hit among all of them
being the US, which is the world’s largest producer of food
crops.
In the US, the world’s biggest producer of corn and soybean,
according to Agriculture Secretary Tom Vilsack, 78% of corn
and 11% of soybean crops have been hit by the drought, and
the situation is far worse than in 1988 when the drought cut
production by 20%. This shortfall will cause a major increase in
the price of corn. Since early June, the price of a bushel of corn
has risen 38%, and of a bushel of beans by 24%. This is
because 61% of the country is affected, which is a far larger
area than was the case in 1988; areas designated as drought
disaster zones now add up to 1,297 counties spread over 29 out
of the 52 states of the US.
According to America’s National Drought Mitigation Centre in
Lincoln, Nebraska, the drought was as tough as the worst
experienced in the 1930s and 1950s, and its timing has been
particularly devastating because it came just at the peak of the
growing season over the central US farm belt east of the Rocky
Mountains all the way to the Atlantic coast. Farmers are now
looking to cut their losses by chopping down crops of
half-mature, earless corn to feed the stalks to cattle, which is
bound to cut corn availability during 2012.

Since June, temperatures have stayed
over 100 F, for days at a stretch in many
parts of central United States; this has
been unusual and does not bode well for
many sectors besides the agriculture
sector but the prospects of food shortfall (and the consequent rise in food
prices) during a period of escalating
unemployment and poverty levels are
threatening prospects. President Obama
therefore ordered that the interest rates on emergency loans for
farmers should be reduced, and drought affected zones should
be opened for livestock grazing.
This is a well thought out step because while crop yields may
drop, adequate animal feed availability would not cut the output
of the meat sector. But crop shortages are a definite trend that
will impact food prices across the world for the simple reason
that, instead of being one of the big exporters of food grain,
the US will be an importer in 2012. If the weather does not
improve in India, China and Russia as well, food crisis is likely to
attain a global character.
The World Bank is watching how the drought impacts global
food supplies after sharp hikes in global food prices during 2008
and 2010 dealt harsh financial blows to the poor, foodimporting nations. According to Marc Sadler, team leader for
the bank’s Agricultural Finance and Risk Management Unit,
while it’s too early to be overly concerned, the bank is closely
monitoring the developing scenario, for its possible impact on
the bank’s clients. “Global stocks in most of the tradable grains
are lower now than they have been historically...... We don’t have
as much in the larder as we used to.” This adds to the worries of
the food-importing countries.
Traditionally, Pakistan has not been a regular food-importing
state but weather conditions this year are proving worrisome. In
the depressing global backdrop, forecasts of low rainfall materializing in Pakistan could make things very difficult at a time when
Pakistan’s exchange reserves are already falling as it repays its
maturing external debt liabilities. In this stressful period, importing food at prices that may rise not only due to crop shortages
but also because of the brokers’ jugglery at global commodity
exchanges (especially in the US); it could make things difficult
and create room for frauds in the state’s purchase of food crops,
as seen during the past four years of the present regime.
With the regime’s focus fixed on ‘completing’ its term rather
than doing anything in that term, we are headed for tougher
times. As it is, consumer inflation has risen to levels that are
beyond the common man’s ability to coup with. What seems
likely in the near future is that further increase in food prices
could add to the chaos on the streets, and disrupt whatever
economic activity is there. But food price hike also offers the
regime a chance to do something good for the common man by
entering into forward food import contracts before prices go
up. But, going by its track record (not buying oil forward in Feb
2009 when it was $36 a barrel) the regime may waste this opportunity as well to its own disadvantage.

29

August 2012

E conomy
The economy:
where is it headed?

R

its first priority, given the fact
that it took power immediately after the current economic recession unfolded on
the global scene with full
force. Instead, in the name
of democracy the regime
indulged in sustained mismanagement of the state. In the last four years, the government has doubled the public debt that accumulated over 61
years until 2008, while GDP growth kept sliding. Some
show of competence in governance it is!
Flawed governance led to waste of resources, and a
sustained decline in Pakistan’s exchange reserves because
power load- shedding broke the back of Pakistan’s manufacturing sector as a whole. Besides reducing exports, it led
to higher import of otherwise locally manufactured goods
causing in the trade and current account deficits to rise
rapidly. Not surprisingly, what finally prodded Moody’s into
downgrading Pakistan’s sovereign risk rating was the fact
that the repayments due to the IMF in 2013 and 2014 alone
equal half of SBP’s current reserve holdings.
This has serious implications for the Pak Rupee’s exchange
rate and inflation, which already seems beyond control. This
trend is likely to worsen in the coming months because the
impending drought will cut growth of the agriculture sector
and force the import of basic items like wheat, rice, pulses,
and sugar at prices that will be much higher because of the
drought in the US, India and China. As wheat price crossed
$300 a ton in global markets, the price in Pakistan increased
by Rs 1,250 a ton, as exporters went into a mad buying spree
fuelling fears that, by depleting its stocks and lower growth
in the next season, in the coming months, Pakistan could
end up importing wheat at much inflated global prices.
To add to this is a disclosure by the Petroleum Ministry that
Pakistan will face severe shortage of natural gas this winter.
To face this gap, the Minister proposed to shut all the CNG
stations in a 2-year period as if CNG demand will vanish
into thin air. With exchange reserves falling rapidly, can
Pakistan import more oil as the alternative, or can the
demand for fuel be wished away? The regime’ standard
response to resource shortfalls has been price hikes portraying its ignorance of the concept of price elasticity of
demand. It does not know that demand for essential goods
isn’t price-elastic i.e. demand for these goods can’t be cut by
increasing their prices. It calls for reducing import of nonessentials to preserving resources for subsidizing the essentials, not programmes like BISP.
The long-term solution lies in increasing self-sufficiency to
reduce reliance on imports. For four long years relying on
expensive rental power instead of increasing self-sufficiency
in this vital sector is the biggest failure of this regime, which
brought the economy to the verge of a total collapse. Yet, all
its visibly self-serving policy decisions were justified in the
name of democracy and the regime’s ‘public mandate’.

esponding to journalists’ questions over the big differences between the estimates of the economic indicators released by Ministry of Finance, and those by the State
Bank of Pakistan (SBP), after delivering his keynote address
at a seminar on ‘Poverty and inequity’ organized by the
World Bank on July 24 in Islamabad the Finance Minister
said, precise projections were the reason why Governor
Yasin Anwar was heading the SBP. How appropriate was the
Minister’s response, and did it undo the impression that the
media has, is for the readers to decide.
The latest statistics released by Pakistan Bureau of Statistics
(PBS) indicated that, in FY11-12, Pakistan's trade deficit had
gone up 36.3% to $21.271 billion over its 2010-11 level of
$15.604 billion because, while imports went up by 11.13%,
exports fell by 4.7%. But, subsequent estimates of decline in
exports exceeded 11% over last year. What the PBS did not
point to was the fact that $21.271 billion was the largest-ever
annual trade deficit in Pakistan’s 65-year history. The focus
was on the fact that compared to 2010-11 foreign inward
remittances went up by $1.986 billion. The fact that the rise
in trade deficit was $5.661 billion was not highlighted.
This trade deficit is dangerous because in 2012-13, external
debt servicing would be the highest, as foretold by the IMF
in April. The question, which seems to bother none in
either in the government or the bureaucracy, is “will
Pakistan repay its maturing external liabilities, or is there a
possibility of its defaulting on those commitments?” An
indication of such an eventuality was that on July 13,
Moody's Investors Service downgraded the sovereign’s
foreign and local-currency bond ratings from B3 to Caa1,
while its short-term rating remained unchanged at ‘notprime’, and the overall economic outlook as ‘negative’.
This development will make it difficult for Pakistan to go to
the global markets to float fresh debt to raise funds to retire
its maturing external debt, which is what it has been doing
for the past four years to repay its maturing domestic debt.
Worse still, this scenario signals that Pakistan may default on
its domestic debt repayment commitments and its sufferers
would be Pakistani banks. The fact that FBR has accepted
the reality that tax revenue collection has fallen short of the
target by Rs 37 billion strengthens the chances of a default.
The NAB accusation against five telecom companies of not
paying Rs 47 billion as sales tax (which could partly cover up
the tax revenue shortfall) is losing its credibility as the facts
relating to that questionable levy are surfacing.
Estimates of fiscal deficit now making the rounds suggest
that, against its target of 3.67% of the GDP, it is already over
6% of the GDP and, in 2012-13, the government has no
option, but to borrow more than what it did last year–over Rs
825 billion. The question is: “where will funds of this size
come from?” Having suffered rating downgrade due to overlending to the state, banks would now be reluctant to lend.
This state of affairs is not unexpected; from day-1 the
regime was overly focused on politicking, not on rehabilitating and restructuring the economy, which should have been

30

August 2012

E conomy
Gas Outages
in Pakistan

by Tariq Iqbal Khan

P

akistan is at present deficient in energy resources. Since
it does not produce sufficient crude oil, it needs some
other resource to meet its energy requirements. During the
60’s, Pakistan had much better energy mix as hydroelectric
power was the major source of electricity. Due to political
expediencies, no further progress could be made for
additional hydro electric resource generation.
After discovery of gas reserves, gas was also used for generating electricity. In 1973, PPL being the major producer of
natural gas, would charge 84 paisas per MCFD (it was
measured in cubic feet at that time).
The natural gas supply side remained strong up to 2004.
Whereafter there was a gradual decline. The estimate was
that from 2008 onward, the Sui field of PPL would supply
negligible natural gas. This proved to be correct.
The main users of natural gas are:
Industrial
• General Industries
• Power generation by
CNG Vehicles
WAPDA and IPP’s
Commercial consumers
• Fertiliser
Domestic consumers
• Cement
The WAPDA power plants were installed in the 60’s and at
that time the supply side was quite strong, but transmission
lines did not have sufficient capacity to transport that quantity.
Some of the IPP’s are on gas and some are on fossil fuels.
The IPP’s on gas planned during the 1990’s was not a very
good idea as the shortage of gas was very obvious.
Fertilisers. It is generally said, perhaps due to lack of
awareness, that we should stop the production of fertilisers
and the gas thus saved may be allocated to other industries
and power production. The first plant on the main grid of
the gas pipeline was installed in the early 60’s viz NGFF
(Natural Gas Fertilizer Factory) Multan. Subsequently it
was expanded and the name was also changed to Pak Arab
Fertilisers Ltd.
The next plant was Dawood Hercules Chemicals installed
near Lahore.
Susequent plants installed on the main source of PPL were:
3. Pak China Fertilisers
1. Daudkhel
4. Hazara Phosphate
2. Lyallpur Chemicals
5. Fauji Fertiliser Bin Qasim
and Fertilisers
The recent new plant of Engro (Plant No.3) is also based
on supply from the National Grid.
The following plants are based on Marri Gas Field.
1. Engro – Plant No.1 & 2
2. Fauji Fertiliser Plant No.1, 2 & 3
3. Fatima Fertilisers
Marri Gas Field was developed by ESSO Standard Eastern
Inc., and the same company was the owner of Exxon (which
subsequently became Engro Chemicals upon divestment by
ESSO and Exxon). ESSO also disinvested their holding in
Marri Gas field. Natural gas derived from Marri Gas is low
BTU gas and cannot be used for general industry. Major

fertiliser industry was developed and installed on this low
BTU gas which was not otherwise usable except for
specially-designed industries or consumers.
Two power generating plants (designed specifically on low
BTU) of WAPDA were also installed on this field. When
Fatima Fertiliser was being planned, the sponsors took care
that they would get the allocation from this field which is a
dedicated field, as this gas cannot be pumped into the system
of the National Grid since, due to this act, the average BTU
would go down and generate lower heat energy. The sponsors no doubt had to pay for the cost of the pipeline from
Marri Gas Fields to Rahim Yar Khan but due to this
additional cost on a separate pipeline, this fertiliser plant
would not face gas shortages in the winter. The biggest
failure of the policy makers was that they could not understand the long-term implications of getting the allocation of
gas from the National Grid.
(For Engro, it can be termed as greed also, because at that time
they could use their political clout to get this allocation sanctioned
from Qadirpur field and did not, or for that matter could not,
visualise the long-term implications). This additional allocation
from Qadirpur field for this expansion of Engro would have an
adverse effect on gas availability to the general consumers and
Engro as well, because the depleting gas resources would be
detrimental to the general consumers and Engro.
Now this third plant of Engro remains closed for 90 days each
winter and in the coming years its elosure duration may be even
longer. Had this plant been planned on Marri Gas, the gas
being allocated to Engro would have been used by the general
industry. According to Ministry of Petroleum, 65% of the
Fertiliser Industry is based on Marri Gas, hence the argument
to close down the fertiliser industry is flawed. It is possible that
35% of the fertiliser industry may be closed down and gas thus
saved be the made available to the general industry.
Another alternative could be that for the fertiliser industry
based on the National Grid, gas required for their raw material purposes (known as Feed Gas) may be allocated from the
National Grid and for gas required for heating purposes, they
may shift to fossil fuels. This can save further 17% of the gas
used by the fertiliser industry, as approximately half of the
gas consumed by fertilisers is for raw material.

31

August 2012

E conomy
Urea and other carbon components of fertiliser are obtained
from natural gas (methane) for which there can be no other
substitute except Naphtha which could be used with modification in the plant that entails a sizeable capital outlay.
CEMENT: The cement industry has already shifted to
coal for quite some time and as coal is cheaper than furnace
oil they are surviving in the competitive market.
CNG: This gas is used in vehicles as substitute for motor
gasoline and diesel. Major investments were made by the
stakeholders in this sector. While vehicles run on Natural
Gas are environment friendly, there was tremendous distortion between the cost of running a vehicle on gas and other
fuels. Slowly, existing vehicles were converted to CNG and
imports of factory-fitted vehicles started pouring in. In
2006/07, motor gasoline produced by Pakistan refining
sector became surplus and the excess motor gasoline which
was not required by the transporters and vehicle owners
was converted to Naphtha, a lower value-added product,
which was another national loss.
The Advisor to the Prime Minister on Petroleum has
announced that during the next two years, CNG in Pakistan
would be phased out. This would result in loss of all the
investment by the general public on CNG stations and the
CNG equipment installed in vehicles. All the motor
vehicles running on CNG would have to be converted to
motor gasoline which would cause additional expenditure
to users while the Government would also be required to
pay for the additional foreign exchange on such import.

c. Aging infrastructure and old pipelines.
d. Bad workmanship while connecting the distribution
line to the consumers.
e. Theft
Generally speaking, transmission losses are negligible or
less than 1% of the gas sold. Sometimes there are even
negligible transmission gains. The companies need to invest
a lot on the replacement of old pipelines, infrastructure and
metering. The biggest distribution losses have been experienced in Bahawalpur and Multan regions where the distribution system was installed just in the beginning, even
before Lahore and Faisalabad. The UFG in Bahawalpur
region crosses 40%.
Segregation of distribution sectors is therefore important
so that the distribution loss could be localized and
controlled through better administrative efforts. The old
distribution lines, meters and regulators also need to be
replaced or repaired. This would however need additional
capital outlay. The gas distribution companies are short of
cash resources.
This shortage can be attributed to an inefficient collection
system, circular debt, UFG and bad development plan
implemented by the government.
The biggest contribution to UFG is theft. Up to 2007, the
UFG was generally between 7-8% of the total gas sold. This
has increased to 13% by 2012. The political system has contributed an additional loss of around 5% of the total gas sold.
Increased UFG The governments should have adopted
appropriate policies in the area of energy to ensure uninterrupted supply as well as efficient use of available resources.
One of the Gas losses is termed ‘Unaccounted-for gas
shortage’ (UFG) which is defined as the difference between
the total volume of the metered gas received by a gas utility
during a period of time, and the volume of gas metered as
having been delivered to the entity’s consumers.
In 2005, the government headed by President Pervez Musharraf adopted the ‘Natural Gas Allocation Management Policy’
which identified the priority users during periods of critical
shortages. Domestic and commercial sectors were placed at the
top followed by the fertilizer industry. The fertilizer industry,
except for the 3rd plant of Engro Chemicals, was planned much
before this allocation. The third priority was assigned to the
independent power producers, or IPPs which had firm gas
purchase agreements.
The policy did not help in overcoming the problem. The winter
of 2011-12 witnessed severe gas load-shedding which led to
also very low pressure for the household sector. the closure of
several industries and CNG stations. There was As a consequence,
rioting broke out in several cities. Corruption within the system
as well as several built-in inefficiencies further aggravated the
problem. UFG is usually one to two per cent in well managed
systems; in Pakistan it was recorded at 12 per cent. This was
equivalent to a loss of $470 million in 2011.
There are a number of factors that contribute to high UFGs.
These include dilapidated pipelines; meter-tampering resulting in
gas theft; leakages because of the system operating at higher
than required pressure; and poor quality of meters. According
to a study by the World Bank, UFG in Pakistan remained
unchanged for decades but there was an upswing by about one

Iran, Pakistan, Argentina, Brazil and India have the
highest number of CNG run vehicles in the world.

Pakistan today is ranked second in the list of ten countries
using gas-fitted vehicles.
Commercial consumers: Use of gas for making tea,
samosas, jalebis and other sweets, is sheer waste of this
precious resource.
Domestic Consumers: These consumers also waste this
resource through inefficient usage in heating and burning.
Unaccounted for Gas (UFG) One major factor of wastage
of this precious resource is the phenomenon of UFG. This
includes the following broad heads:
i. Transmission loss.
ii. Distribution loss.
a. Leakages
b. Faulty and old meters.

32

August 2012

E conomy
percentage point a year in 2009 to
2011. Taking note of this change, the
Oil and Gas Regulatory Agency
(OGRA) announced a regulatory
regime that allowed it to impose large
fines on the gas utilities for excessive
UFG. The OGRA planned to move
back to the original trajectory and was
prepared to allow about 4.5% of
UFG in 2012. In 2012, the World
Bank was invited by the government
to get engaged with the Sui Southern Gas Limited to reduce the UFG.
The bank agreed to provide a loan of $100 million for this
purpose. According to the bank’s loan document “the reduction in UFG would mean that more gas is potentially
available for power generation and could displace expensive
petroleum products being used for the same purpose.”
The regulation does not improve the Gas supply into the system.
The UFG penalty results in enhancement of Gas Development
Surcharge (GDS). It is commonly believed that the consumer is
required to pay for this inefficiency. This is against the fact, as
while determining the tariff certain adjustments are made
inclusive of UFG losses. The entire system needs to be cleaned.
Better management and regulation must accompany increased
investments. While vacating a stay order against gas price determination by the Oil and Gas Regulatory Authority recently,
Justice Ayesha Malik of Lahore High Court re-articulated an old
adage ‘justice delayed is justice denied’. She observed that gas
companies cannot be run on stay orders for years by undermining the regulator and compromising their own efficiency.
The fact, however, remains that the two utilities – SNGPL
and SSGCL have been denying their consumers the benefit
of fair gas pricing for three years on the basis of stay orders
granted by different high courts. Justice Malik decided to
club together three different cases and conduct detailed
hearing on gas SNGPL pricing during three financial years –
2010-11, 2011-12 and 2012-13 – on August 28.
This year the OGRA had determined reduction of Rs. 47.5
per MMBTU (Million British Thermal Units) by reducing the
line loss limit from 7% to 4.5% for the two utilities. Both the
companies were able to secure stay orders against the OGRA
determination separately in the Lahore High Court and Sindh
High Court. The previous stay orders for the last two financial
years are also to be decided yet. On account of the failure to
achieve loss reduction targets, the consumers/shareholders
are estimated to have lost Rs. 38 billion in two years and Rs.70
billion in three years. The UFG is an issue which needs to be
addressed properly.
But more than the loss to consumers in the form of tariff,
the two gas utilities, according to a Planning Commission
estimate, are causing a cumulative annual loss of about
Rs.350 billion to economy as higher gas system losses result
in utilization of expensive alternate fuel that, in most of the
cases, is furnace oil. These system losses are almost five times
larger than the WAPDA’s combined distribution losses.
The transmission and distribution losses of the two utilities that
went up to 13% were resulting in wasteful consumption of 350
million cubic feet per day (MMCFD). Given the fact that furnace oil

is used as replacement fuel for power
generation and industrial use,every
million British Thermal Unit costs the
economy an additional burden of $20
per MMBTU. As such, the daily
additional cost on import of furnace oil
comes to about $7000, translating into
annual additional burden of $2.55 billion.
Likewise, the domestic geysers are
described as gas guzzlers whose
efficiency could be increased by 20% by
putting in a small conical baffle costing
Rs.500 per piece in every geyser while
the gas efficiency could be further improved up to 45% by installing
instant geysers. The Gas Company supplies it on request; the cost
is recovered through easy installment and is included in Gas bill
under a separate head. These two measures alone could provide
another saving of 250 MMCFD, reducing import bill by $450
million in three winter months.
OGRA had arbitrarily fixed the gas distribution losses to 4.5%
through mandatory 1% loss reduction every year until 2008 but the
previous OGRA chairman raised the benchmark to about 11% in
one year. After his sacking the original scheme was reintroduced.
From the Companies’ point of view, 1% system loss translates into
direct loss of 45 MMCFD per day or about Rs. 5 billion per
annum. But economic loss in the value chain is higher than Rs. 300
billion MMCFD based on value addition theory.
Over time, natural gas has become a vital energy source for
Pakistan. In 2009-10, the country consumed about 1.5 trillion cubic
feet of gas. All of this was produced from domestic fields. At the
current output forecasts, the country is at or near its peak production. Remaining gas reserves in 2010 were estimated at 27.5 TCF
which means that, at the present rate of consumption, they will be
exhausted in about 18 years.
The sector already faces a supply gap, of 0.5 TCF by 2015 which
may increase to 2.0 TCF by 2025. However, additional supplies
could be generated by tapping what the industry calls ‘tight
reservoirs’. They are more costly but if exploited, domestic reserves
could almost double.
The pattern of consumption that evolved over the years was largely
the consequence of government’s priorities and policies. By 2010,
the electricity sector with 29% of the share in consumption was the
largest consumer followed by general industry at 25%, preferred
industries (fertilizer, cement and steel) at 18%, households at 17%
and transport at 8%. But this pattern began to change as a result of
the Government policies formulated in recent years.
Over the six year period to 2010 although gas consumption
increased at the rate of 2% a year, about half the rate of increase in
the gross domestic product, there were significant differences
among different users. Consumption by industry increased by 9%
a year. It grew by 5% annually for domestic users, and at more than
30% for the transport sector. The last increase was the result of the
government’s policy to switch automobiles from the use of diesel
and gasoline to compressed natural gas, or CNG.
Severe shortages of natural gas caused almost as much damage to
the national economy and as much discomfort to the citizenry as
the shortage of electricity. In both cases it was the failure of public
policy that caused these shortages to occur.

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T rade & Industry
Auto spare-parts industry:
is it being sidelined?

P

akistan’s automotive
industry has been an
active and growing field
for a long time, though
not as well-established to
figure in the prominent
list of the top auto
producers. Despite significant production volumes,
transfer of technology and
localization of vehicle components remains low, although automotive industry has invested about Rs
92 billion over the years
in manufacturing facilities, and contributed Rs
71 billion to the national exchequer last year.
According to Ministry of Industries, Pakistan produced its first
vehicle in 1953, at the National Motors Limited, established in
Karachi to ass- emble Bedford Trucks. Subsequently buses,
light trucks and cars were assembled in the same plant. Later,
major Japanese manufacturers entered the market creating some
competition in this sector. Assemblers of HINO Trucks, and
Suzuki Cars (1984), Mazda Trucks, Toyota (1993) and Honda
(1994) entered the local industry. Assembly of Daihatsu and
Hyundai cars (1999), and various brands of LCVs and range of
mini-trucks, commenced recently.
The production of all sorts of vehicles, including motorcycles,
cars, trucks, etc., manifested rapid growth in last decade. According to available data, motorcycle production in Pakistan has
increased by leaps and bounds in the past 12 years. It has
increased from a mere 100,000 units at the start of the 21st
century to around two million this fiscal. No other industrial
sector has shown such a high and sustained growth over the past
decade. Similarly, the car industry of Pakistan also witnessed
growth in production rate. Production of light commercial
vehicles (LCV) and Jeeps, which rose to 179,000 units, represents
an increase of 22% over FY11. Industry sales soared to the
highest figure in four years with sales of LCVs and pickups
soaring 15% month-on-month to 19,156 units, abetted by
pre-buying by consumers in anticipation of the price hikes
expected as a result of Euro-II compliance by manufacturers.
Amid stiff competition from exports and the steep depreciation
of the local currency, statistics released by PAMA establish that
the major players in the industry managed to achieve massive
growth during FY12. Pak Suzuki mustered a hefty 40% year-onyear growth as a result of the Government of Punjab’s Taxi
Subsidy scheme with year-end sales standing at 112,157 units
compared to 79,941 units sold during FY11. Indus Motors also
recorded a 9% growth over last year aided by a steady demand for
their sedans throughout the year. Indus Motor’s newly launched
Vigo Champ, which gained 156% growth in sales from April to
June 12, was another factor that led to increased sales volume for
the manufacturer. Recently, in the month of July 2012, Honda
Pakistan celebrated the 200,000th vehicle (City Aspire).

by Syed Asif Ali

According to auto market
sources, one of the important reasons for increase in auto sales is the
considerable increase in
remittances which rose to
$13.2 billion during the
year to boost the sector’s
profitability. However, in
the absence of the sales
boost as a result of
govern- ment subsidy
schemes ex- perienced this
year, growth is expected to
decline to 6% in FY13.
Moreover, the sector’s
profitability and productivity will also remain heavily sensitive to any structural changes in
the tax regime as well as margin-eroding currency depreciations. In this regard, the entire industry’s focus remains riveted
on the announcement of the long-term Auto Industry Development Program (dubbed AIDP-II) which will prove to be a
critical factor in the industry’s growth going forward.
AIDP approved in 2008 expired in June 2012. Terms of the
new AIDP are yet being discussed with the stakeholders, and
are expected to be approved in mid-August 2012 as Ministry
of Commerce has sought some more time to examine the
industry proposals. The industry’s stakeholders are of the view
that the proposed AIDP will put adverse impact on flourishing
industrial sector; hence they are opposing this program. The
officials of Pakistan Association of Automotive Parts and
Accessories Manufacturers (PAAPAM) and Pakistan Auto
Manufacturers Association (PAMA) claim that the new AIDP
was prepared without consulting the local industry and is a
deliberate attempt to provide extraordinary benefits to a
foreign auto group. According to them, the new AIDP should
be based on a consistent policy of solid commitment to the
local industry.
According to the proposed AIDP, any new entrant in the
Pakistan’s auto sector having production capacity of 100,000
units per year would be allowed to import 100% completely
knocked- down units (CKD) at a levied customs duty for three
years. Local auto and spare parts manufacturers are showing
great concerns on this strategy of importing 100% CKD units
as they have invested huge capital in local assembly and manufacturing plants.
These changes in auto policy would adversely affect the
motorbike sector. The Board of Investment’s initiatives to
incentivize a Japanese motorcycle manufacturer’s re-entry into
Pakistani market at a zero tariff rate has shaken the confidence
of investors and local manufacturers. Allowing a new investor
to import all motorcycle parts at zero duty would make a big
dent in the local vending industry which has progressed
through technology transfer and currently produces 95% parts
locally, giving employment, and generating revenues through
several hundreds of small- and medium-sized vendor units.

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During his visit to Japan on 21-23 Feb, 2011 President Asif Ali
Zardari also held a meeting with Yamaha officials and reportedly assured them that his government has framed friendly rules
and procedures for foreign investors in the auto sector. The
delegation offered a proposal to manufacture Yamaha motorcycles in Pakistan. Yamaha now plans to invest $150 Million to
establish a manufacturing facility of world renowned Yamaha
Motorcycles in National Industrial Park, Bin Qasim, Karachi by
acquiring 50 acres of land.
In August 2011, a meeting was held in the Presidency to review
progress on building of the Yamaha motorcycle plant in Karachi. The meeting, presided over by President Asif Ali Zardari,
was attended by Senior Minister for Industries Ch. Pervaiz Ilahi,
Secretary General to the President M. Salman Faruqui, Chairman BOI Saleem H. Mandviwala, Secretary Industries Aziz
Ahmed Bilour, and Spokesperson of the President Farhatullah
Babar. Later, briefing the media, Farhatullah Babar said that
during the President’s visit to Japan and his meeting with
Japanese investors and manufacturers, Yamaha Motorcycle
Company had shown interest in setting up a motorcycle manufacturing plant in Pakistan.
He said that during the meeting, it was informed that a team of
Yamaha executives had already visited Pakistan to firm up plans
and proposals for manufacturing motorcycles in Karachi. The
President called for encouraging foreign investments in the
country and to extend all possible facilities to the foreign investors to take advantage of investment opportunities in the country. The President said that motorbike was an economical means
of transport for low income people and directed that all bottlenecks in the way of Yamaha’s investment and setting up of its
manufacturing plant in Pakistan should be removed on priority
basis and the process should be stepped up. BOI has also
proposed to set up a new Japan Specific Special Economic
Zone in Sindh Economic Zone with broad features offering
one million acres of government land in the proposed area to
provide direct access to Port Qasim.
Yamaha is hoping to start production in Pakistan from early
2013. Much progress has been made in the project and land has
been earmarked near port Qasim. If the government sets
customs tariff at zero percent the payout period of Yamaha’s
investment could be just five years. According to sources,
Yamaha’s principal was hesitant to invest in Pakistan at 10%
duty. Finally, however, Yamaha has agreed to invest in Pakistan
and the company will introduce new models every year. The
motorcycles will have EFI engine, Automatic Transmission,
Water Cool & Environment Friendly Exhaust Systems meeting
European standards. Yamaha will not only meet the demand of
Pakistan’s market, but will also export its models to various CIS
countries. Yamaha’s investment in Pakistan will create 45,000
jobs, and with the transfer of technology in manufacturing of
motorcycles, vendor skills and capability and capacity will also
be developed with exclusive training institutes run by the
company.
Local industry demanded that BOI should be neutral in policies
and treat all stakeholders equally. On condition of anonymity, a
senior official of PAAPAM said that the logic offered by one
OEM, Yamaha, is particularly worrisome and against the
interests of the country and future industrialization. Their local
lobbyists are none other than advisers employed directly in the

BOI to serve their interests. Local industry is against the government decision of waiving off the import duties for new entrants
in the auto sector.
Pakistan undoubtedly needs foreign investment, but the country
should not be so desperate in attracting investment as to cater to
unit-specific investment proposals, and destroy its most vibrant
sectors where locals and foreigners are already investing. Stakeholders say that a sad reality is that the BOI has not been able to
succeed in attracting foreign investment because of genuine
reasons such as local law and order situation and global financial
crisis. Genuine foreign and domestic investors don't seek special
incentives but seek long-term consistency in policy. He further
added that the projection of Yamaha as a new investor by BOI
conveniently ignores the fact that the same brand was being
produced and marketed for decades in Pakistan, and was forced
to wind up after its failure to compete with other brands,
especially the Chinese bikes.
Stakeholders strongly believe that any policy misstep at this stage
will send a wrong signal and crowd out local motorcycle vending
base that has been developed after decades of hard work and
investment. Syed Nabeel Hashmi, Chairman PAAPAM, said that
he and his association have no objection to arrival of new investors. He personally thinks that new entrants would bring new
technology, which is good for the industry. The association is
looking forward to develop contacts with international manufacturers, besides analyzing the possibility of joint ventures with
them. However, the special concessions the new entrants are
demanding are totally unjust. “The plan to allow a new investor to
import all motorcycle parts at zero duty will negate previous
policies, and will encourage producers to bypass local vendors
and manufacturers. This policy u-turn is worrisome and against
the interests of the country and future industrialization”, he said.
He was of the view that Yamaha Company is maintaining strict
confidentiality in its trade agreement which is creating doubts in
the local industry. Local industry would definitely encourage new
entrants if they maintain good trade relations. According to him,
the government is trying to hide the facts by propagating that
Yamaha would make investment of more than $150 million. First
of all, Yamaha is not a new entrant in Pakistani auto sector; their
bikes were selling for decades in local market but they rolled back
their operations due to the cut-throat competition created by
Chinese bikes. Now they are coming again in the Pakistani market
without entering into a joint venture with a local company. They
are interested in importing Japanese parts, and according to
market sources, they are more interested in launching 125CC,
150CC and sports bikes like Yamaha R1, R6 and Fazer. They will
use the extremely beneficent geographical location of Pakistan as
they are more interested in export of bikes to the CIS countries.
He said that the government claims that new investment will
introduce new technology to the country are mere eyewash, as
existing players have introduced the latest Euro-II engines in their
products without any special incentives. Current players are even
willing to import hybrid and EFI-based engines without special
incentives. This development has made Pakistan an attractive
country for the foreign auto manufacturers. It is learnt from the
market that another leading Japanese bikes manufacturer
KAWASAKI, which had rolled back its production from
Pakistan, is also making the feasibility reports to re-enter in the
Pakistani market.

36
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Besides the bikes sector, foreign OEMs are also eyeing the auto
industry of Pakistan because of these relaxations. On July 13,
Advisor on Industries Muhammad Basharat Raja told the
National Assembly during question hour that the government
is considering giving more incentives for investment in manufacturing of cars in the country to meet local requirements. He
said that negotiations were held with delegations of a Korean
Company and General Motors, and hoped for positive results.
Pakistan is manufacturing around 150,000 cars locally and more
than 50,000 cars were imported last year. These numbers are
insufficient to meet the local demands. It is worth mentioning
that Pakistan is a country with the least vehicles per capita (13
vehicles per 1000 people). Pakistan ranks 134th in the list while
India ranks 132nd with 18 vehicles per capita. These figures
clearly indicate the future potential of the auto industry of the
South East Asia.
On the question of demand and supply ratio and soaring prices
of auto vehicles in Pakistan as compared to the regional countries, Syed Nabeel Hashmi replied that prices of the vehicles
will drop when the local industry manufactures cars by availing
economies of scale. Cars in India are cheap because of the large
scale production. In Pakistan, the production level should be
raised to 500,000 units per year to bring the prices down.
It has been noted that the local manufacturers are neglecting
safety standards such as air bags and automatic braking system.
80% of the road accidents around the world occur in the developing countries including Pakistan where 75% of the world’s
population lives. According to World Health Organization
(WHO), 1.3 million people died every year due to road accidents.
Pakistan ranks the 10th in the world with most Road Traffic
Accidents (RTA). RTAs are also the 12th most common reason
for the deaths in Pakistan. In the last decade, 99,932 RTAs
occurred in Pakistan killing 52,039 people. In 2011, more than
1,100 persons lost their lives in RTAs in–Karachi alone. According to the data retrieved by Rescue 1122 service, road accidents
claimed 40% of the fatal 160,000 deaths in Punjab in 2011. It has
been estimated that 30% of the deaths in RTAs in Pakistan were
caused by low safety vehicles. The data indicates the importance
of safety regulations in Pakistan.
It has been proved that the number of fatalities can drop by
improving the safety standards of the vehicles. For instance,
Taiwan witnessed a 14% decline in the motorcycle RTAs fatalities
and a 22% reduction in head injury fatalities with strict imposition
of helmet law and increasing safety standards of the bikes.
Here in Pakistan, there is a huge responsibility imposed on the
local manufacturers to install safety devices in their vehicles.
According to a senior official of the Pakistan Standards and
Quality Control Authority (PSQCA), local manufacturers and
assemblers don’t follow the regulations. PSQCA’s engineers have
made regulations after thorough research and described in
complete detail things like air bags, engine kinetics, braking
systems, etc., but the assemblers didn’t follow PSQCA regulations.
He accepted the fact that Pakistan’s industrial sector is still in the
development phase, hence safety rules need to be improved “but it
is the responsibility of local auto assemblers to adopt the safety
standards. PSQCA is a standards making authority but cannot
force the standards because PSQCA does not have any regulatory
powers. Government regulators should enforce the safety and
quality standards and black list those manufacturers and assemblers

who are not complying with them” and added that “EURO-II”
engines would be in the Pakistani market this year.
It is worth mentioning here that other countries always tend to
improve their safety and quality standards and they are now
working on ‘side’ air bags while Pakistani-assembled cars still
lack the primary air bags. There are regulations for everything in
Pakistan; solution lies in the implementation thereof.
Assemblers quote an entirely different opinion on the quality and
safety regulations in Pakistani vehicles. They are of the view that
they provide the best quality and safety devices in their vehicles.
Additional safety requirements would definitely result in a hike in
vehicle prices. They further claim that the PSQCA and EDB
need to formulate a mandatory quality and safety policy which
should be imposed on all assemblers and manufacturers. Only
then, the safety standards of the Pakistani vehicles would be
effective and be at par with international standards.
Government of Pakistan sees this scenario differently. EDB
convened a meeting of Auto Industry Development Committee
(AIDC) on July 17, 2012 which was attended by representatives
of PAMA and PAPAAM to discuss AIDP with special focus on
new investment in auto sector. Parliamentarians, EDB and Industries Ministry are of the firm opinion that three local car assemblers have formulated a cartel which explains why they are charging higher prices and ‘own money’ (premium on car prices) on
different models. Kashmala Tariq, MNA, Hamid Yar Hiraj,
Qudsia Arshad, Khawaja Mansoor Sohail and a number of
senators have criticized local car assemblers for charging extra
money. On condition of anonymity, sources in the Ministry of
Commerce revealed that the local auto vendors play to the whims
of this cartel because they have to sell their products to them.
All institutions and stakeholders need to own responsibilities on
their part and play their role in the betterment of the economy.
Safety and quality institutions should make uniform and
consumer friendly safety and quality standards for all types of
vehicles and government regulators need to impose it as mandatory. Similarly, auto manufacturers, whether local or foreign, need
to understand that they can grab a larger proportion of the
market if they provide quality on reasonable prices. Local industry
should not be afraid of new entrants in the market. They would
not only survive, but could expand their customer base if they
upgrade their quality standards and provide a better option to the
consumer. Japanese vehicles are also sold out in European
countries but their local industry has no complaints as they are
giving far superior quality and safety features to their customer.
This is why, a BMW lover would never switch to Toyota Lexus.
Local auto industry should not be afraid of competition; they can
win the match by upgrading their standards.

37
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August 2012

B anking & Finance
A shameless refusal
to learn lessons

F

or the past four years, the global
financial services sector is constantly
being shaken up by disclosures about
malpractices that continued in spite of
the events that should have served as
warning bells. Sub-prime lending, relying
on risk hedging contracts sold by entities
over-burdened with risks, suicidal assetdeposit ratios, hostile takeovers, asset
marketing targets driven by greed, and
weak internal controls; this was the mix that caused the recession that now bleeds the world. OPEC members made this
scenario worse by pushing the oil price to killing heights.
Despite all this, indications are that market players continued
fraudulent practices, quoting interest rates that weren’t based on
their realities and therefore distorted the yardstick market rates
used globally to price all contracts ranging from student loans to
mortgages, forward exchange rates, option contracts and
derivatives. This malpractice by troubled global banks to stir
positive sentiments about their health–was unforgivable, given
the fact that the too-big-to-fail institutions involved in these
activities were already ‘bailed’ out by their governments at a
huge cost. What they should have done was to redefine
business philosophies and reorganize, by injecting rationality
therein, not use tactics to distort the yardstick interest rates.
The first bank to admit to the US Department of Justice on
June 23, that it committed this fraud, was Barclay’s, and paid a
hefty fine of US$453mn be shared with the British government. The other banks in this loop were Lloyd’s, RBS, and
Hong Kong & Shanghai Banking Corp. But what Barclay’s
deserves credit for is the fact that it accepted the truth and its
top brass–the CEO, Chief Operating Officer, and Chairman of
the bank’s Board of Directors–accepted the onus for what
happened by stepping down, which wasn’t how other banks
responded to this tragedy.
As this saga came to light, the British government reacted to it
very vociferously. During his weekly question and answer
session in parliament on July 4, British Prime Minister David
Cameron branded as "appalling" the LIBOR-fixing involving
Barclay’s Bank, and asked CEO Bob Diamond to quit. "It is
outrageous, frankly, that homeowners may have paid ‘higher’
mortgage rates and small businesses may have paid ‘higher’
interest rates, because of skivvy and probably illegal activity."
While he backed a parliamentary inquest into the scandal that
has tarnished the image of London as the world’s most trusted
financial centre, Labour Party called for a judicial inquiry into
the scandal along the lines of the investigation into the phonehacking affair at the News Corp. David Cameron still favours a
parliamentary inquiry because it would take much less time.
Whatever the parliament finally agrees on, the fact is that his
repeated reference to ‘higher’ interest rates is not backed up by
facts that subsequently came to light; the more likely possibility
is that borrowers paid a bit less than the fair interest rates
because banks under-quoted the interest rate. What should
worry him is his government’s role in the affair.

On July 4, by when it’s Chairman, CEO
and COO had quit, Barclays’ gave its first
in-depth explanation of the scandal by
posting on its website the 9-page document it later presented to the British
lawmakers; that document regretted that
events causing it to pay the highest-ever
fine for a settlement with regulators
"should never have taken place". Also,
that part of the rigging was due to
traders trying to fix the rate for their own gain, and that traders
who manipulated Libor had been sacked and those who did stay
behind, had been punished.
That document went on to disclose that Barclays’ conducted an
exhaustive internal investigation involving re-examination of 22
million documents from over 200 custodians, a million audio files,
and 75 interviews that took over three years. This long exercise
revealed that on “occasions the bank submitted a lower rate so it
didn’t appear to have higher funding costs” and “it believed that
banks contributing to the Libor survey were deliberately reporting
lower borrowing costs than they were actually paying” i.e. several
banks were part of the rate-fixing casting doubts over creditworthiness of many global banks that participate in determining
Libor. This again shook confidence in the financial services sector.
The more worrying part was that the document involved the
Bank of England (BoE), because Barclay’s hinted at receiving
soft advice of the BoE on rates to be quoted to British Bankers’
Association for calculating the average Libor based on banks’
composite rates. Bob Diamond, Barclays’ CEO until he quit on
July 4, said that Paul Tucker, now The Deputy Governor of
BoE, called him in October 2008, to communicate concerns
‘within the government’ about the level of Barclays' funding
costs. The document says Diamond ‘thought’ he had been told
by BoE that Barclays’ should not submit Libor quotations at the
high levels as it had been doing after Lehman Brothers collapse
when borrowing costs of most banks were rising.
On July 9, deposing before a Parliamentary Committee, Paul
Tucker vehemently denied conveying this impression, which is
amazing because Bob Diamond couldn’t have said what he said
without evidence thereof. Should that happen, it would establish that Tucker wasn’t conveying just a BoE view point but also
government concerns and the erstwhile Secretary of the Treasury too got involved in this affair; the now exposed letter from
the then US Secretary of Treasury advocating the same
(lowering of the Libor) could make things worse.
The right of the government to contain any harmful trend in
the country’s markets can’t be faulted. But what makes any such
move lose its authority is its being restricted secretively to one or
a few market players because it creates inequalities among
market players. In fact, the government becomes part of
rate-fixing scandals. Democracies can’t indulge in creating
inequalities in the markets; they do so yet claim not doing so and
courtesy their agents in the media, have gradually pushed
democracy to the brink. That this is going on in the ‘developed’
democracies is shocking.

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B anking & Finance
Systemic risk: why it
must be contained?

By A.B. Shahid

E

institutions could touch such high leveraging levels without
being punished by their regulators later became the subject of a
debate in the US legislature. But, while this exuberance was in
full swing, regulatory action was withheld assuming that “free
markets had the prudence to self-regulate”, that proved overoptimistic, and economists later had to admit that greed can
dilute markets’ self-regulatory obligations.
This was not the first time economists and
regulators failed to visualize the consequences of over-optimism. Until 1961, James
J. Saxon, Comptroller of Currency, thought
that bank supervision implied far more than
ensuring bank soundness, but he also
thought that the diverse services offered by
non-bank intermediaries were threatening
the competitiveness of banks. However,
constraining banks could cost more than the cost of permitting
banks to fail in a less constrained set up. It was therefore not
surprising that gaping holes in bank supervision began appearing in the 1970s i.e. the post-bank de-regulation era and led to
many risks to crystallize causing a chain of global crises starting
with the 1973 oil price hike.
By 2007, institutions were again highly over-leveraged; they
assumed that by buying risk-hedging contracts, they could
prevent liquidity stress, and its disabling consequences. The
reason that rendered this concept flawed was that the hedge
contracts buyers overlooked the excessive risks the contract
sellers were booking, vulnerabilities created by globalization, the
events that could trigger a global crisis and the resultant contraction in trade flows, and inability of markets globally to meet
their commitments. None, including the regulators, tracked the
build-up of risk portfolios, especially those that reflected
sale-purchase of Credit Default Swaps (CDSs).
The forgotten lesson of de-regulating banking in emerging
markets in the 1990s was that compromises on supervisory
norms in an environment of volatile exchange and interest rate
regimes can prove lethal. Prudent de-regulation requires
changes in the supervisory profile to reduce its dependence on
traditional checks that can prove ineffective in liberalized
environments; it calls for a quantum change in the way it is
perceived and imposed, and requisite upgrading of the skills of
the regulators. Above all, it necessitates restricting lever- age to
safe limits i.e. setting stiff liquidity yardsticks.
At that time, Robert R. Bench, a banking sector expert, had stated
that “financial liberalization and innovation mandates that the
supervisors review their traditional attitudes toward measurement of liquidity; while supervisors may continue to insist on
some survival stock of liquid assets, marketization of risk
requires supervisors to view liquidity as a ‘dynamic’
phenomenon...its supervision needs to go beyond stock and flow
concepts, to dynamic considerations i.e. overall balance sheet
symmetry, variety and sensitivity of funding sources, asset-credit
concentrations, assets that could be securitized, but above all else
he pointed to the “market perception of a bank’s current and
future asset quality, and [its] present and future earning capacity.”

vents beginning late 2007 proved once again that
systemic risk crystallizes as the consequence of distress
in the inter-connected sectors of the financial system, and
intensifies or subsides as fortunes of the effected sectors
change. After 1973, when currencies were placed on freefloat, chances of frequent distress became stronger but the
emergence of risk hedging contracts bucked risk-taking that
otherwise seemed unmanageable. But what rendered the
system vulnerable yet again was banks’ greed-driven approaches to risk-taking on the assumption that risk could
conveniently be passed on to other market players–a view
that encouraged imprudence in risk selection, made worse
by imprudence in selecting the hedging contract sellers.
By end 2007, the year the financial bubble eventually burst,
financial institutions had become money-minting machines.
In the US, they were earning over 40% of total corporate
profits. Risk hedging products, including the new variety of
contracts that even CEOs and Boards of Directors couldn’t
grasp, became the drivers of American economy. Mortgage
industry became the dominant sector of this over-expanded
system by providing loans that formed the raw material for
Asset-backed Securities (ABS), and the Wall Street became
the route for re-packaging ABS, and their onward sale to
banks and financial institutions around the globe.
With the sort of profits it was earning until 2007, the Wall
Street was generating wealth not seen since the debt-fuelled
1980s. But neither the market players nor market regulators
bothered to recall the global market crash of 1987. In 2007,
employees in the US financial services earned a baffling sum
of $53bn in salaries; Goldman Sachs–the biggest of the five
big brokerages at the onset of the crisis–accounted for
$20bn of this astounding amount that worked out to over
$661,000 per employee, and its CEO alone got $68mn.
Without any supporting documentation, any property buyer
could claim to be the recipient of six-figure salary and could
obtain a $500,000 mortgage loan. That wasn’t all; a month
later, that borrower could also obtain a home equity line of
credit. As a result, house prices skyrocketed and the citizens
turned speculators in real estate, trading homes and tapping
ever-larger home equity lines to buy more houses. This setup explains why sub-prime mortgages shot up to $2trn out
of the total US mortgage market of $14trn.
This was a clear sign of systemic risk skyrocketing, limiting
which should be the aim of good regulation; regulation has
to set the pace of competition and direction of risk-taking.
The key issue is determining the safe levels of risk sharing
between institutions but deregulation triggered competitive
pressures that lured banks into un-conventional risk-taking,
though lending to sub-prime borrowers was bound to cause
market distress if such borrowers failed to make productive
use of the borrowed funds for their timely repayment–this
outcome wasn’t visualized despite earlier precedents.
More worrying dimensions of this amazing growth were the
week survival bases of institutions; debt-equity ratios of the
Wall Street firms were as high as 32 to 1. The mere fact that

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B anking & Finance
This implies that Central banks must prepare and constantly
up-date their contingency plans. Containing damage once a
calamity hits the markets may prove futile and bad publicity
would come as an unwanted extra. Although Central Bank
supervision has improved, it is neither sufficiently proactive nor
meets the challenging demands of the changed market complexion. Central Banks keep demanding excessive paper work in the
name of reporting requirements a lot of which serves no good
purpose. What they still lack is focusing on the crucial information rather than the size of it, which, in many cases, could be too
unwieldy for expeditious scrutiny and prompt remedial steps.
For containing systemic risk, the critical aim of regulation
should be to deal with the effect of the externalities, when
private and social interests (desired flexibilities and returns)
diverge considerably. For the financial system, its concern for
sustaining systemic stability in the event of a contagious run
should form the thrust of regulation. The major issue being
debated these days is deciding on the institution, and the
mechanisms that institution should use to prevent this eventuality. Some of the areas that this institution should focus on are:
- Since systemic risk is rooted in various sectors of the
economy, as its regulator, what should the Central Bank
monitor and supervise? Banks, DFIs, Leasing Companies,
Modarbas, Musharikas, Discount Houses, trading houses,
etc.? This is obviously too large a canvas for any Central Bank.
- What’s the market complexion in terms of number of the
participants, their sizes, operating weaknesses and strong
points, and does regulation impact them uniformly?
- What is the current strength of the regulator in terms of
its financial resources and expertise infrastructure to fight
speculative attacks on liquidity and interest and exchange
rates that may push systemic risk to unmanageable levels
for the smaller market participants?
- Are payment & settlement systems functioning smoothly?
If not, what does evidence provided by the instances of
its partial failures indicate? Is the problem only due to the
operating systems’ malfunction, or does this indicate that
breakdowns are caused by frequent market or individual
bank illiquidity, malpractice by the market participants, or
other reasons? Could a severe market breakdown cause a
domino effect?
- Is the regulatory system, that monitors market distress,
correctly focused and does it automatically trigger needed
remedial action, followed by in-depth investigation that is
fully documented?
- What has been the record in the context of handling bank
failures? What was the regulator’s level of preparedness?
Are such instances documented and, based on them, are
workable rescue strategies prepared?
- Have the strategies been drafted in understandable terms
so that those implementing them clearly know what they
are to do, and when?
- Who must ultimately pay for the rescue of a failed bank?
If the operation is conceived as an initiative to secure the
interests of the citizens (i.e. taxpayers), shouldn’t it be the
State or will the Central Bank foot the bill? The first view
obviously assumes that Central Banks no longer have the
responsibility of safeguarding the interests of depositors
and borrowers.

- The cost of regulation is ultimately borne by depositors
and borrowers. How much regulation and supervision is
considered enough at a specific cost that is acceptable to
both banks and their customers?
- What is the quantum of regulation and supervision (based
on the market’s profile) that could contain systemic risk?
Should depositors and borrowers alone bear this cost?
Shouldn’t others, whose interests will be secured against a
systemic failure, also pay for it?
- The current trend favours insuring smaller deposits. This
introduces another controversial aspect. Will the focus on
assuring micro-level stability of the system impact Central
Bank’s conduct at the macro level? Aside from this
on-going controversy the other major issue is the dismal
role of insurers almost everywhere. Despite these issues,
the question to be addressed is “whether a deposit insurance arrangement is in existence, and if so, what is the
level of its preparedness for paying claims if one of the
major banks were to fail?”
Market deregulation and the fierce global competition in its
wake, caused a slide in the effectiveness of Central Banks to
manage and control systemic risk since there was a visible
diminution in Central Banks’ willingness to apply mutual
surveillance, and reluctance to inject Central Bank funds to
rescue troubled foreign banks operating in their countries.
While these are issues on which multilateral dialogue (under
BIS auspices) is on, the ground reality is that consequences
of any large bank’s failure (besides the domino effect) can
be pervasive. For instance,
- Sudden freezing of a bank’s operations can cause wholly
unnecessary hardship for its good borrowers in the sense
that, besides being unable to borrow from the bank, they
can’t obtain release of their collateral quickly enough to
switchover to another bank.
- Distress selling or auction of a bank’s assets results in a
sharp decline in market values of similar assets held by
other banks as collateral, thereby suddenly inflating their
effective uncovered exposures.
- This impacts not just banks but other businesses holding
similar assets and (even though temporarily) shrinks their
balance sheets, and thus their capacity to borrow.
- A market distress generated contraction in the borrowing
capacity of businesses could cause domino effect in nonfinancial sectors of the economy; in financial terminology
these possible outcomes have been referred to as herding,
cascading, and mimetic contagions.

40

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B anking & Finance
Bank security: prudence
of out-sourcing it

T

he corner stone of globalization of trade was to allow for
distributing economic activity world-wide in a way that
every activity was performed by those with maximum comparative advantage. The logic was that this will ensure that the activity
was performed at the lowest cost to benefit its beneficiaries. This
logic triggered out-sourcing because it made economic sense
and the hope was that it will cut operating costs and let the
owners and customers of an enterprise share its benefit.
But before organizations decide to out-source some of their
activities, they had to examine whether making these changes
could give rise to new risks and, if so, how could those risks be
mitigated effectively, so that out-sourcing activities didn’t escalate
the overall risk of the organization because it is also the area
wherein organizations could end up making errors. Banks, as we
all know, are expected to be extra careful while taking risks because
they deal in other peoples’ money, which they hold in trust on
behalf of their depositors. Thus, in the context of out-sourcing
they have to be more selective than any other business.
Banks must make a distinction between their core and non-core
activities to decide on what they can out-source without adding
to risk. Over-ambitious bankers are often lured by the economies that out-sourcing appears to offer. That’s why, at times,
they unwittingly over-estimate the economies that out-sourcing
offers, either by overlooking or consciously down-playing the
risks involved. It is this tendency that needs curbing, not out`sourcing.
To prevent banks exceeding safety limits, prudent regulators
forbid out-sourcing of activities that may endanger customer
funds. In out-sourcing, it is relatively easy to ensure that loss of
customer confidentiality does not materialize but ensuring that
depositor funds aren’t put at risk poses a huge challenge since it
involves decision-making and risk-taking. Regulators therefore
insist that all such activities – banks’ core functions – mustn’t be
out-sourced. Having said that, it is as important to point out
that out-sourcing some services is mandatory; law and bank
regulations require it to eliminate any conflict of interest
between banks and their customers.
Services such as asset valuation, credit referencing and rating,
and establishing financial value of losses caused by tragedies
must be left to independent agents that are licensed (usually by
a designated office of the state) to provide these services. On
the other extreme are services such as premises and non-IT
asset up-keep, advertising, etc., that do not involve risking
depositor funds, or pose serious risks to a bank’s reputation, can
be out-sourced at the discretion of their management.
Between these two extremes are services that involve risks, and
so may be out-sourced only after careful assessments of
service-providers’ capabilities, antecedents and their capacity
for uninterrupted delivery thereof since out-sourcing always
involves risks. The mere fact that some of these risks may
appear remote does not justify their being ignored; they must be
mitigated conclusively, or their financial or reputational costs
factored in. One of the services outsourcing which is progressively proving imprudent is bank security. Since the 1990s,
almost every bank opted to out-source this vital function–a key

prudent because incidents of
service providers’ staff being
involved in robberies have
escalated at an alarming pace
suggesting that, perhaps, banks
should have continued with
their own security set ups. How
well security service providers
are equipped and prepared to
perform this delicate service
was partly covered in the July
issue of Value Chain. The mere
fact that this sector is virtually
un-regulated, and thus exempt
from any binding legal obligations to ensure that security guards
are carefully selected, trained, armed, and not forced to over-work,
seriously handicaps this sector.
In 2011, bank robberies country-wide had averaged below
two-a-month but in the seven months of 2012, this average is
on the rise and close to three-a-month–a highly worrisome
trend. In some of these incidents, the CCTV facility wasn’t
working either because of power load-shedding or because it
was out of order. But what was worse was the fact that there
were cases wherein it was switched off–a clear indication that
the on-duty guards were in league with the robbers.
While the incidents caused by guards joining hands with the
robbers are tragedies caused by a policy flaw those caused by
the security systems being dysfunctional courtesy supervisory
neglect are unpardonable. Banks cannot pass the blame on to
anyone else for this failure. Such incidents call for a revamp of
the security supervisory system and imposition of clearly
defined rules for both branch personnel and head office staff
responsible for ensuring bank premises security. One hopes
that neglect in this area had nothing to do with cost-cutting–the
policy that is driven by a desire to sustain profitability in a recession and is being prioritized over other considerations.
That said, the vulnerabilities created by out-sourcing of this
crucial service are the debatable issue. Should banks go for
economizing in this area, and should the regulator have overlooked this critical change in management of banks as it did?
Experience shows that it wasn’t
advisable given the sustained Out-sourcing of
slide in poverty levels and security proved
rising crime rates since the
disastrous.
1990s.
Should banks
Coupled with weak security
go for econosupervision in banks, this has
mizing in this
proved a serious lapse. While
area, and
the state-provided security is
should
inadequate, banks must place
regulators
security supervision at a high
overlook this
priority based on the lapses
recorded thus far.
critical change?
The lesson therein points to the need for often unannounced
verification of the state of security system’s alertness during,

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B anking & Finance
but more often after, working hours, by qualified bank staff,
to raise consciousness about the bank’s stake in this critical
function. Emerging trends in bank robberies warrant the use
of human and technological arrangements inside and
outside bank premises to watch those entering the premises
with the intent of committing a crime, but can’t be spotted.
This is the failure of both security skills as well as technology,
which is compounded by the after-effects of unannounced
power-load shedding that disables the detection gadgetry.
Bank security is a sacred obligation that can’t be left to those
who are largely incapable of delivering on this promise. The
rising incidents of bank robberies manifestly indicate that the
security agencies are not the ‘specialists’ – the logic for giving
them this job to economize on this cost. Secondly, it is only
prudent to accept the fact that, ultimately, obligations are
owed to employers and, in the present circumstances,
security agencies and not banks are the employers. Security
guards’ loyalty is to security agencies, which is a weak
arrangement for the banks to rely on in this crucial area.
security arrangeIt is therefore Historically,
ments that worked very well
not unlikely
consisted of security guards
that a bunch in who were banks’ permanent
this workforce employees with high stakes
could contrive in banks (salaries and benefits)
and, to secure their future,
ways of
compensating (i.e. provident fund, pension)
itself by criminal they all performed very well.
means–aiding Working for security agencies that are un-regulated
bank robbers
and not monitored for followfor a share of
ing basic ethical employment
the loot
practices – requisite training
and provision of relevant defence gadgetry, fair compensation and rational working hours, job security, and a future
secured by provident fund and pensions–makes the security
guards hate the job they do. It was therefore not unlikely that
a bunch in this workforce would contrive ways of compensating itself (in one go) by criminal means–aiding bank
robbers for a share of the loot.
Given the declining capacities of the law enforcers–an
amply demonstrated reality–it would be pretty unrealistic to
assume that they will catch the bank robbers. The rising
incidents of target killings, general lawlessness on the
streets courtesy the failure of the in-power regime to deliver
even the essentials like water, electricity and sewerage cleaning and maintenance, but, above all the frustration created
by rising unemployment keeps thousands of violent
protesters on the streets all over the country; controlling
them not only consumes the entire energy of the law
enforcers but tires them to a killing extent.
This scenario began developing after the assassination of
Ms Benazir Bhutto. The scenes witnessed during the last
week of December 2007 showed the power of PPP’s Sindh
Card, and foretold the future given the limitations of the
law enforcers’ –a distortion that kept developing over
decades unnoticed by the successive regimes as well as the
citizens, but especially by the business community that is
now suffering the most.

According to the January 5,
2008 State Bank of Pakistan Weaknesses in
press release, in the country- law enforcement
emerged over
wide street violence for just 4
days after the tragic demise
the decades,
Ms Benazir Bhutto, 699 bank courtesy sleepy
branches (10% of the national
regimes, and
network) got hit, 290 of them
neglect
by the
getting damaged extensively.
business
Of the total 699 branches, 521 community that
were located in Sindh, 164 in
Punjab, and 7 each in Khyber is now suffering
the most
Pukhtunkhaw and Baluchistan.
In addition, 148 ATMs were also destroyed.
Over the years, the security scenario has deteriorated because
law enforcers have plenty to take care of besides the routine
street unrest; terrorism is now a much bigger threat than it
was until 2005. Organized crime is now a thriving business;
‘bhatta’ collectors now operate everywhere and localities like
Layari are ‘their’ territory. In this scenario, expecting that the
law enforcers will be able to recover stolen bank assets, and
bring bank robbers to justice is expecting far too much. Can
banks afford it?
What all this proves is that security can no longer be left in
its entirety to the security agents; it has to be effectively
over-seen by banks. The failure that is leading to this conclusion is banking sector’s continued neglect of the need for
regulation of the security services sector–prudent and tough
criteria for qualifying as security agent, detailed description
of duties and obligations, character checks for employment
of individuals as security guards, employment and training
practices and the key aspects to be covered while reporting
robbery incidents. In spite of the fact that these regulatory
requirements are not there if banks must continue to rely on
out-sourcing security, they should thoroughly supervise this
activity. This implies making up for the huge gaps in the
capacities of the security agencies that banks will still depend
on. But do banks have the requisite mechanism–security
experts with proven record and up-dated security gadgetry?
Developing these capacities is a tough challenge but one that
must be accepted.
Banks must have in-house expertise to continually check and
verify that security arrangements are trustworthy as well as
adequate, keeping in view the emerging trends in crime. This
requires expertise, unannounced branch visits by the banks’
security experts to verifying the presence of branch-specific
on-duty security guards and their alertness, security gadgetry
in working condition, and taking immediate corrective steps
if any of these elements is not in a state of readiness. This
entire drill must be defined in the bank’s security manual and
should be present in every branch and all the staff members
should be familiar with the emergency procedures. To ensure
that, there must be frequent emergency drills. Finally, these
checks should be carried out more often after the branch’s
working hours. Finally, bankers must realize that while the
basics of the security systems could be out-sourced, security
remains banks’ own obligatio. What has yet to be observed is
the reflection of this awareness; we see little in terms of
change in the current approach to bank security.

34
42

August 2012

R esearch & Development
Biotechnology and
its impact

by Mubarik Ahmed

B

4. Bioarchaeology, Anthropology, Evolution, and Human
Migration
• Study evolution through germline mutations in lineages
• Study migration of different population groups based on
female genetic inheritance
• Study mutations on the Y chromosome to trace lineage
and migration of males
• Compare breakpoints in the evolution of mutations with
ages of populations and historical events
5. DNA Forensics (Identification)
• Identify potential suspects whose DNA may match evidence
left at crime scenes
• Exonerate persons wrongly accused of crimes
• Identify crime and catastrophe victims
• Establish paternity and other family relationships
• Identify endangered and protected species as an aid to
wildlife officials (could be used for prosecuting poachers)
• Detect bacteria and other organisms that may pollute air,
water, soil, and food
• Match organ donors with recipients in transplant programs
• Determine pedigree for seed or livestock breeds
• Authenticate consumables such as caviar and wine
6. Agriculture, Livestock Breeding, and Bioprocessing
• Disease, insect, and drought-resistant crops
• Healthier, more productive, disease-resistant farm animals
• More nutritious produce
• Biopesticides
• Edible vaccines incorporated into food products
• New environmental cleanup uses for plants like tobacco
Genetic engineering is turning out to be more difficult and
more expensive than early proponents expected. In the early
1980s biotechnology was touted as a miracle technology that
was going to usher in a new era of agricultural abundance
with minimal harm to the environment. Some of the most
important commercial applications of biotechnology are
discussed below.
7. Engineered Crops
The most widespread application of genetic engineering in
agriculture is in engineered crops. Thousands of such products have been field tested and over a dozen have been
approved for commercial use. The traits most commonly
introduced into crops are herbicide tolerance, insect tolerance, and virus tolerance.

iotechnology is defined as the use of biological processes
for the development of products such as foods,
enzymes, drugs, and vaccines. Biotechnology is the new label
for a process that humans have used for thousands of years
to ferment foods such as beer, wine, bread, and cheese. In
these cases, biological processes are used to alter raw food
products to produce more stable food. Presently, the term
biotechnology is used to describe genetically engineered food
that contain genes modified by modern technologies.
Biotechnology is at the intersection of science and ethics.
Many see this technology as a significant force in improving
the quality of people’s lives in the 21st century. There are
many sub-branches of biotechnology including genetic
engineering, food bio technology, agricultural bio technology,
animal and plant tissue culture, molecular biology, fermentation technology, proteomics etc. Rapid progress in genome
science and a glimpse into its potential applications have
spurred observers to predict that biotechnology and genomics will be the foremost science of the 21st century.

Some current and potential applications of genome
research include
1. Molecular Medicine
• Improved diagnosis of disease
• Earlier detection of genetic predispositions to disease
• Rational drug design
• Gene therapy and control systems for drugs
• Pharmacogenomics "custom drugs"
2. Energy and Environmental Applications
• Use of microbial genomics research to create new energy
sources (biofuels)
• Use of microbial genomics research to develop environmental monitoring techniques to detect pollutants
• Use of microbial genomics research for safe, efficient
environmental remediation
• Use of microbial genomics research for carbon sequestration
3. Risk Assessment
• Assessment of health damage and risks caused by radiation exposure, including low-dose exposures
• Assessment of health damage and risks caused by exposure to mutagenic chemicals and cancer-causing toxins
• Reduce the likelihood of heritable mutations

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R esearch & Development
systems. Some low level of research activities may still be underway. Pigs have been engineered with roundworm genes to
produce their own omega-3 fatty acids, but have not been
commercialized.
Animals Engineered as Drug-Production Facilities
Status: Goats and sheep have been engineered to secrete bioactive molecules into their blood, urine, or milk. Companies are in
the process of developing commercial enterprises based on
these animals. So far, none of the drugs is in the market. It is
likely that producers will want to slaughter the animals for food
after they are no longer useful for drug production.
Animals Engineered as Sources of Transplant Organs
Status: Commercial entities are engineering pigs so that their
organs will not be rejected by human transplant recipients. So
far, the organs are not commercially available. It is likely that
producers will want to use the carcasses of donor pigs as food.
Animals Engineered for Disease Resistance
Status: Chickens and turkeys have been engineered to resist
avian diseases, but not commercialized.
9. Genetically Engineered Fish and Shellfish
Fish and shellfish have been engineered to cause changes in
hormones that accelerate growth in several laboratories, but so
far not commercialized.
10. Genetically Engineered Plants Eaten Whole as Food
Many plants have been commercialized, including tomatoes
and squash and commodity crops like corn and soybeans. Most
have been engineered for one of three traits: herbicide
tolerance, insect resistance, or virus tolerance.
11. Genetically Engineered Fiber Plants
Genetically engineered cotton has been approved for commercial use.
12. Engineered Insects Used in Agricultural Systems
No engineered insects have been approved for commercial use.
An engineered predatory mite has been field tested in Florida.
Researchers have engineered honeybees and other beneficial
insects to tolerate pesticides.
13. Engineered Micro-organisms Used as Pesticides
Several bacteria engineered to enhance their ability to kill or
repel pests have been approved for commercial use. These
products are used as pesticides in agricultural fields and gardens.
14. Food Processing Aids Made from Engineered Bacteria
Bacteria have been genetically engineered to produce rennet, an
enzyme important in making cheese. Genetically engineered
rennet (chymosin) is approved for commercial use and widely
used by U.S. cheese processors.

Herbicide Tolerance Case Study: Soybeans
Herbicide tolerance allows crops to withstand otherwise
lethal doses of herbicides, which are chemicals that kill
plants. Some herbicides kill virtually all plants and cannot be
used on crops. By offering crops tolerant to herbicides,
chemical companies can expand the market for their products. Indeed, the major developers of herbicide-tolerant
plants are companies that sell herbicides. The current set of
commercially available herbicide-tolerant crops is tolerant to
three herbicides based on three active ingredients: bromoxynil, glyphosate, and glufosinate.
Insect Tolerance
All of the commercially available insect-tolerant plants
contain a version of the toxin Bacillus thuringiensis (Bt),
which is found in nature in soil bacteria. Bt toxins are highly
effective for many pest organisms, like beetles and moth
larva, but not toxic to mammals and most other nontarget
organisms. A major concern among farmers and environmentalists is that wide use of Bt crops will lead to the rapid
development (over the course of perhaps as few as three to
five years) of resistance to the toxin. If resistance develops,
the Bt toxin will be useless as a pesticide. In this case, the
environmental benefits of the product will be short lived. Bt
cotton is the most remarkable story, generating both substantial reductions in pesticide use and substantial yield increases.
Cotton production requires very high doses of pesticides,
over 25 percent of all insecticides used globally are sprayed
on that crop. So, the introduction of Bt varieties make a
significant contribution to reducing global insecticide use.

Virus Tolerance
The third major application of biotechnology to crops is virus
tolerance. These crops contain a gene taken from a virus. By a
process that is not well understood, plants that produce
certain viral proteins are able
to fend off infections by the
viruses from which the proteins
were taken. Two virus-tolerant
crops are currently approved
for commercial use, papaya
and squash. The squash, which
is resistant to two viruses, is
currently off the market.
Although it is difficult to get
information on why products are not in the market, it is possible
that the squash did not perform well enough in the field to
capture market share.
8. Genetically Engineered Livestock and Poultry
Animals Engineered for Leaner Meat
Status: No livestock engineered for leaner meat is currently near
commercialization. Research done early in the 1980s to genetically engineered leaner pigs failed because of unacceptable side
effects, including low fertility, arthritis, and impaired immune

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R esearch & Development
15. Animal Drugs Made by Engineered Bacteria
A drug has been produced for dairy cowsâ&#x20AC;&#x201D;recombinant
Bovine Growth Hormone (BGH) or Bovine Somatotropin
(BST)â&#x20AC;&#x201D;by engineering a bacterium to contain the gene for the
hormone. The drug is administered to cows to increase milk
production, despite the chronic over supply of milk in the
United States. A highly controversial product, BGH is currently
used on about a third of the U.S. dairy herd.
16. Vaccine
An interesting product is a rabies vaccine intended for use on
wild raccoons. In this case, genetic engineering was used to
construct a "hybrid" virus made up of a component of the
rabies virus inserted into an unrelated "carrier" virus. The
resulting virus confers immunity to rabies but poses no danger
of causing the disease. Baits laced with the vaccine have been
distributed in many parts of the eastern United States in
attempts to combat rabies in wild raccoon populations. The
vaccine has been approved by the U.S. Department of Agriculture, despite suspicions that it has been only marginally, if at all,
effective. Early studies on efficacy failed to demonstrate that the
product could control rabies in wild raccoon populations. Data
from more recent studies are being withheld from the public as
confidential business information.
17. Food Biotechnology
Genetic modification of agricultural crops promises the availability
of food products with more desirable traits, such as higher
quantities of vitamins or lowered amounts of saturated fats for
consumers, reduced use of pesticides and other chemicals for
environmentalists, and increased yields for growers. Traditional
plant breeding, the conventional method to modify plants'
genes, has produced similar benefits. But recent biotechnological innovations allow scientists to select specific genes from one
plant or animal and introduce them into another to confer
desirable traits. This produces the new plant or animal more
quickly than conventional methods, and creates plants and
animals with traits not found previously in nature. Proponents
argue that advances in genetics and new technologies can
produce foods with greater yields to feed the growing world
population in the 21st century. Critics are concerned that this
technology produces uncertainties about potential long-term
impacts on public health and the environment, and increases
problems related to trade.

usefulness for the reproduction of identical livestock animals was
only recently investigated. In 1995, sheep were cloned from embryonic cells in Scotland. In 1996, a substantial breakthrough followed
when a sheep, Dolly, was cloned from an adult, nonembryonic cell.
Japanese scientists are creating high-value beef cattle through
cloning. They have successfully cloned at least 19 calves from adult
bovine cells. Because the cost of some premium beef roasts can be
between $100 and $200 per pound in Japan, the Japanese cattle
industry can support the expense of cloning prize beef cattle. But
even with those prices, the cost of genetically engineering cattle on a
large scale could be prohibitive.
Federal Responsibilities for Regulating Genetically Modified Foods
In 1986, the White House Office of Science and Technology Policy
(OSTP) finalized the responsibilities for regulating genetically
modified foods. For example, the Food and Drug Administration
(FDA) is responsible for regulating food and feeds in the market that
have been modified through genetic engineering. The U.S. Department of Agriculture (USDA), Animal and Plant Health Inspection
Service (APHIS), regulates importation, interstate movement, and
environmental release of transgenic plants that contain plant pest
components. It licenses, through permits, the field testing of food
crops prior to commercial release. But agencies' responsibilities
overlap as some plants have been modified to contain plantpesticides. The Environmental Protection Agency (EPA) registers
certain pesticides produced in transgenic plants prior to their
distribution and sale and establishes pesticide tolerances for residues
in foods. APHIS and EPA together established procedures to review
and approve field tests of modified plants and microorganisms.
FDA has post-market authority to remove food from the market.
Table I shows an overview of federal agencies' responsibilities.
Agency

Products Regulated

Reviews for Safety

FDA

Food, feed, food
additives, veterinary drugs

Safe to eat

USDA

Plant pests, plants,
veterinary biologic

Safe to grow

EPA

Microbial/plant pesticides,
Safe for the environment.
new uses of existing pesticides, Safety of a new use of a
novel microorganisms
companion herbicide

Critics about bio-technological applications and products
The introduction of bioengineered crop varieties onto the
market has not been without controversy. Some critics have
suggested that recombinant DNA modification could make
foods unsafe to eat, though most concerns have revolved
around the potential impact of bioengineered crops on the
environment. Environmentalists have claimed, for example,
that gene-spliced varieties could harm wild biodiversity by
killing beneficial insects and other living organisms, or by
becoming invasive weeds. Those and related concerns have
been used as the justification for increasing regulation on
biotechnology in the United States and abroad. Countless scientific bodies, including the National Academy of Sciences, the
American Medical Association, and others, have concluded that
gene splicing techniques themselves are actually safer than
traditional breeding methods because breeders know which
new genes are being added to plants and exactly what function
those genes perform. They all are believed on this slogan:
As the worldâ&#x20AC;&#x2122;s population grows, environmental stewardship will
require science to find ways to produce more food on less land.

18. Cloning
Biotechnology is also used to produce experimental "transgenic" animals, in which the genetic material has been deliberately modified and to produce "clones" in which animals are
reproduced artificially but the DNA is not modified. In agriculture, transgenic animals may be altered to produce higher yields
of specific products (meat, milk etc.) or to bring about
commodities with enhanced characteristics, such as less cholesterol or reduced fat content. Although cloning has been used
to reproduce animals for scientific purposes since the 1950s, its

45

August 2012

R egulator y Compliance
1) WITHHOLDING TAX:

is to create a balance between privileges and obligations of
Primary Dealers to achieve the objective of development of
debt market in Pakistan.
According to the amendments, all banks / DFIs interested in
Primary Dealer (PD) status, will have to ensure that their
charges on Investor Portfolio Securities( IPS) accounts are
reasonable and in line with SBPâ&#x20AC;&#x2122;s objective to broaden the
investor base of government securities. Primary Dealers have
been instructed to provide efficient IPS accounts related
services to customers. PDs will be eligible to claim commission @ 10 paisa per Rs. 100 for all accepted Non Competitive
Bids (NCBs) of individuals, employee provident / pension
funds and corporate except Asset Management Companies
(AMCs), Mutual Funds, Insurance / Mudaraba / Leasing
companies in Market Treasury Bill (MTB) and Pakistan
Investment Bond (PIB) auctions. A maximum limit of Rs.
250 million is placed for submitting NCB by any one investor
in any one tenor of PIB/MTB auction. PDs will be required
to display prices of Government Securities on Reuters,
Bloomberg / EBND and at their branches.

The Federal Board of (FBR) on July 2 announced that retailers
or final consumers will not be liable to 0.5 percent withholding
tax under Section 153A of the Income Tax Ordinance, 2001
whereby every manufacturer has to collect WHT at the rate of
0.5 percent at the time of sale of gross sales to all distributors,
dealers and wholesalers.
The FBR has issued Income Tax Circular No. 01 of 2012
clarifying new Section 153 A of the Income Tax Ordinance
2001 inserted through Finance Act, 2012. According to the new
Section 153A of the Income Tax Ordinance, 2001 every manufacturer has to collect withholding tax at 0.5 percent at the time
of sale of the gross sales to all distributors, dealers and wholesalers. This adjustable WHT is leviable on the gross sales to all
dealers, distributors and wholesalers irrespective of whether
they are registered or unregistered taxpayers with income tax or
sales tax.
The gross sales will be inclusive of sales tax and federal excise
duty, and any trade discount shown on the invoices or bills.
Retailers or final consumers will however not be liable to
withholding tax under this section.
The commission agents from whom tax under Section 233 has
been withheld shall also not be liable to collection of tax under
Section 153A.
The circular has also clarified that none of the sector has been
exempted from deduction of 0.5 percent WHT as an impression was created before the issuance of the circular that the
manufacturers or producers like sugar and flour mills, and ghee
and cooking oil units might be exempted from collection of 0.5
percent WHT against the sales made to dealers, distributors and
wholesalers from July 2, 2012.
Similarly, like other manufacturers, the manufacturers of
fertilizers, pesticides and other sectors would also be liable to
deduct the 0.5 percent tax from their unregistered dealers,
distributors and wholesalers.
In budget 2012-13, FBR had proposed 1.0 percent tax to be
collected by manufacturers to their unregistered distributors
and wholesalers. Through the amended Finance Bill 2012-13,
the rate of tax has been slashed from 1.0 percent to 0.5 percent.
Therefore, the manufacturers will have to deduct the 0.5
percent tax from the dealers, distributors and wholesalers under
the Finance Act 2011.

4) ADVANCE TAX INTRODUCED AS TOOL
FOR CGT COLLECTION:

The Federal Board of Revenue (FBR) has introduced advance
tax to be collected under Section 236C of the Income Tax
Ordinance 2001 for the purpose of providing a tool to collect
capital gain tax on disposal of immovable property.
FBR has issued an income tax circular to explain capaital gain
on immovable property. To overcome the administrative problems being faced in collection of CGT on disposal of immovable property and to keep track of the transactions of immovable property adjustable advance withholding tax @ 0.5 percent
of the consideration received on sale/transfer of immovable
property was levied on sellers/transferors of immovable property under section 236C of the Income Tax Ordinance 2001.
The FBR has clarified that the advance tax to be collected
under section 236C has been introduced for the purpose of
providing a mechanism for collection of capital gain tax on
disposal of immovable property. The actual quantum of capital
gain and tax payable thereon is to be computed at the time of
filing of income return. Section 236C is not an independent
provision and does not operate in isolation. Since Capital Gain
Tax has been imposed only on disposal of properties held for a
period of p to two years therefore advance tax is also to be
collected from sellers who held the immovable properties for a
period up to two years.
FBR further clarified that in view of the modified constitutional
position exemption to capital gains on the disposal of immovable property held for a period of up to two years was
withdrawn by making amendments in section 37 of the Income
ax Ordinance 2001 through the Finance Act 2012. Simultaneously, a new Division was added in the First Schedule to the
Income Tax Ordinance, 2001 giving the following rates of tax to
be paid on capital gains from disposal of immovable property:
1. Where holding period of immovable
10%
property is up to one year
2. Where holding period of immovable
property is more than one year but not
more than two years
5%

2) FBR RELIEF TO SALARIED CLASS:

The Federal Board of Revenue has issued income tax circular
No. 02 of 2012 that explains the structure of tax rate on salary.
The computation of tax on salary shall be as per slabs
mentioned in the Finance Act 2012. Instead of applying tax rate
on gross amount of salary, computation of tax is to be made
through progressive tax rates. The maximum relief has been
provided to low salary income and the relief gradually decreases
with the increase in salary.

3) SBP amends rules governing PDS:

The State Bank of Pakistan in a Master Circular (DMMD
Circular No. 12) issued on July 3 has amended certain rules
governing the Primary Dealer System in order to streamline and
further strengthen this system. The purpose of the amendments

and and irrigation are the key resources in crop productivity
in any environment. In absence of these resources it is not
possible to cater the food demand for the increasing population of
any country. Now a days, the Pakistan agriculture is set in a very
distinctive situation of an increasing population on one hand and
diminishing resources on the other. The population of Pakistan
was reported to be 131.63 million in 1996 and is projected to be
207 million in the year 2015.The agriculture sector has to face the
difficult task to at least double the existing food production by the
turn of this century. The situation demands immediate measures
for an horizontal and vertical growth in the productivity by not
only increasing the land under cultivation but also increasing the
cropping intensity and the per hectare yield.
In Pakistan, wheat, rice, sugarcane and cotton are the main crops.
Wheat and rice were the major cereals cultivated on largest area of
about 11.80 million hectare during the year 2010-11. While sugarcane and cotton are the cash crops and were cultivated over more
than 4.20 million hectare during the year 2010-11. The agricultural
land in Pakistan is generally fertile but due to shortage of
resources, inferior technology and other factors the crop productivity is much lower to the potential yield. Table-1 shows the gaps
between actual and potential yields in various crops.

and fallow-wheat. Among these, cotton-wheat and rice-wheat
systems together account about 60% of the total wheat area,
whereas arid wheat covers more than 1.50 million hectare area.
Figure-1: Comparison of Wheat Yield during the year 2012.

Source: USDA 2012

wheat cultivars, wheat productivity has increased in all the major
cropping systems representing the diverse and varying agroecological conditions. These semi-dwarf wheat cultivars have a
genetic yield potential of increasing the yield to 6-8
Table - 1: Gaps between Actual and Potential Yeilds
tons per hectare comparing the national average
yields of about 2.66 tons per hectare. A large
Yield Gap (%)
Yield (tons/hectare)
number of experimentae stations and on-farm
Mixed
MixedRice Wheat
Rice-Wheat
Crops
cropping
Cropping
Cropping
demonstrations have repeatedly shown high yield
Potential Yield cropping
system
system
Overall (tons/hectare)
system
system
Overall potential of the varieties. The progressive farmers
of irrigated areas have harvested yield of 6-7 tons
3.508
3.59
3.528
7.116
50.7
49.4
50.4
Rice
per hectare. However, in arid areas the yield ranges
64.24
69.94
69.790
106.944
39.9
34.6
34.7
Sugarcane
3.51
3.528
3.528
40.5
40.5
40.5
5.930
Wheat
between 0.5 to 1.3 tons per hectare depending on
the amount of rainfall. In irrigated areas the wheat
Source: Pakistan Journal of Life and Social Science,2011.
productivity is found to range from 2.5 to 2.8 tons
Wheat: Wheat is considered to be an important commodity all per hectare depending
upon the amount of available water and
over the world, grown on about 223.55 million hectare with a total
other factors. Figure-2 shows the wheat yield in kilograms per
production of about 665 million metric tons. The Global average
hectare in different regions of Pakistan.
productivity is around 3.03 metric tons per hectare. With a high
Figure-3: Cotton Yield (kilograms per hectare) in Pakistan
variability among countries and regions, the highest average yields
are obtained in United Kingdom, France, Germany and Egypt
with yields above 7.0 tons per hectare. In China, India, Pakistan
and Iran the average per hectare yields are 4.86, 3.05, 2.66 and 2.00
tons, respectively. China, India, United States, Former Soviet
Union, France, Canada and Australia are the key producers with
57 percent of the collective share in productivity. The later four
countries due to their heavy surplus cater the world market where
as the top producers China and India rarely export wheat in
international market due to their high domestic demand. Figure-1
shows the comparison of wheat yield in million tons per hectare
among some countries of the world.
Source: Agricultural Statistics of Pakistan 2010-11.
In Pakistan, wheat being the staple diet is the most important crop
Factors contributing towards yield gap: Wheat production
cultivated on the largest acreages in almost every parts of the
in the country has been well below potential and there is around
country. The total wheat area in Pakistan is about 9.00 million
60% yield gap in wheat, which is required to be narrowed. The
hectares. It contributes 14.4% to the value added in agriculture and
major reason for low productivity and instability includes:
3% to GDP. The wheat is grown in different cropping systems,
â&#x20AC;˘ Delayed harvesting and consequent late planting.
such as: cotton-wheat, rice-wheat, sugarcane-wheat, maize-wheat,
â&#x20AC;˘ Non availability of improved inputs like resistant variety of seeds.
Over the past three decades with the introduction of semi-dwarf

47

August 2012

A griculture
• Shortage of irrigation water, drought in rainfed and terminal heat
stressed areas.
• Soil degradation.
• Unawareness of farmers to modern technologies as a result of
weak extension programs.
Cotton: The world cotton production is projected to be 113.31
million bales for the year 2012-13. Out of this China, India, United
States and Pakistan are the key producers with the net productivities
of about 30.5, 24.0, 17.0 and 10.0 million bales, respectively. The
Former Soviet Union produces about 6.74 million bales. Whereas
the rest of the countries only contributes marginally. The average
per hectare yield of the world is 745 kg per hectare. The maximum
cotton yields of above 1300 kg is obtained in Australia, Syria, Brazil
and China. In India, Pakistan and United States the yields are
reported to be 484, 704 and 879 kg per hectare respectively.
Cotton is the most important cash crop of the country that
contributes approximately 60% to foreign exchange earnings of
Pakistan. With an area of 3.20 million hectares, it is the second
largest crop that provides raw material for the local textile industry
and exports. Besides, cottonseed accounts for 70% to the national
oilseed and ghee production. It accounts for 11.7% value addition
in agriculture and about 2.9% to GDP. Record high production of
14 millions bales were obtained in 2007-08 in Pakistan. Approximately 80% of Pakistan's cotton is grown in Punjab with Sindh as
the second largest cotton growing province. The average yield of
cotton in Pakistan is 0.70 tons per hectare. Comparing the potential yield of 1.30 tons per hectare. This leaves 40% of unexploited
potential to be achieved through various interventions. Yield
projection to 1.00 ton per hectare stands a good milestone to be
achieved by the year 2015. Figure-3 shows the yield of cotton in
different provinces of Pakistan.

Figure-4: Comparison of Cotton Yield during the year 2012.

Source USDA 2012.

RICE: Rice is the second largest cereal produced in the world.

Rice cultivation is the principal activity and source of income for
millions of households around the globe, and many countries of
Asia and Africa are highly dependent on rice as a source of foreign
exchange earnings and government revenue. At the beginning of
the 1990s, annual rice production was around 350 million tons that
has now reached 465 million metric tons. The production is
geographically concentrated in Western and East Asian countries.
Asia is the largest rice producer that accounts for about 90% of the
world's production and consumption of rice.
Out of the total production of world, China, India, Indonesia,
Bangladesh, Vietnam and Thailand are the key producers to
contribute about 141, 100, 37, 27 and 21 million tons respectively
annually. Thailand, India, United States, Vietnam and Pakistan are
the key exporters.
Figure-5: Comparison of Rice Yield during the year 2012.

Figure-2: Wheat yield (kilograms per hectare) in Pakistan.

Source: Agricultural Statistics of Pakistan, 2010-11.

Pakistan is the fouth largest producer of cotton in the world, the
third largest exporter of raw cotton, the fourth largest consumer
of cotton and the largest exporter of the cotton yarn. The
comparison of cotton yield of pakistan and other leading
countries is shown in figure-4.
Causes of low yield: Cotton crop faces a number of constraints,
including low yield per acre. The causes are:
• High price of agricultural inputs (seeds, fertilizers, pesticides etc).
• Higher intensity of insects and pests attack.
• Shortage of water.
• Lack of advance technologies (like IPM), awareness and agroprofessionalism.
• Above all natural factors like unexpected rain, drought and floods
especially in southern Punjab and Sindh.

Source: USDA 2012.

In Pakistan, rice is the secod largest staple food crop after wheat,
the third major crop area-wise and a source of major export
earning accounting for 6.1% of total exprot earnings over the last
five years. It accounts for 6.8% in value added in agriculture and
1.7% in GDP. Area under rice is about 2.80 million hectares, with
1.16 million hectares under basmati, 0.93 million hectares under
IRRI, and 0.29 million hectares under other varieties. The production is estimated to be around 6.80 million tons which includes
2.70 million tons basmati, 3.56 million tons IRRI and others 0.55
million tons. Average yield is about 3.6 tons/ha, with basmati
yielding 1.60 tons/ha, IRRI 2.70 tons/ha and other varieties 1.87
tons/ha. The two major rice-growing provinces are the Punjab
and Sindh, that accounts for 68% and 23% of the area under rice.
Basmati rice is only grown in Punjab.

48
47

August 2012

A griculture
The per hectare yield of rice in Pakistan is much below the world
average of 4.33 tons. Maximum average yields above 6.00
tons/hectare are obtained in countries like United States, Peru,
China, Japan, South Korea, Egypt and Italy. In India and Pakistan
average yields are reported to be 3.41 and 3.64 tons per hectare
respectively. There exists a large gap between the actual and potential production of rice in the country. Fig-6 shows the rice yield in
kilograms per hectare in pakistan.

Figure -7: Sugarcane Yield (kilograms per hectare) in Pakistan.

Figure -6: Rice Yield (kilograms per hectare) in Pakistan.

Source: Agricultural Statistics of Pakistan, 2010-11.

the area and contributes 61% to the country's total cane production.
Sindh is the second largest cane-growing province with 25% of the
cane acreage. The national average cane yield is 47 tons per hectare and
is far below the existing potential. Fig-7 shows the sugarcane Pakistan.
Causes Of Low Cane Yield.
The main reasons for low yield per hector are:
• Old age agricultural practices.
• Improper selection and preparation of land.
• Conventional planting methods.
• Poor management of ratoon crop.
• Poor and defective varieties.
• Rapid and unplanned increase in sugarcane acreage in unsuitable
areas of Pakistan.
OVER ALL CAUSES OF LOW PRODUCTIVITY IN
PAKISTAN
Besides, above all mentioned factors. There are some other reasons
that contribute to low productivity in Pakistan.
• The rural population in Pakistan is rising; the numbers of small
farms are increasing with time despite the total area under cultivation
being essentially fixed.
• Most empirical evidence indicates that the land productivity on
large farms in Pakistan is lower than that of small farms, because of
absente farmers and lack of interest in adopting modern technologies.
• Inadequate and untimely availability of irrigation water.
• Contraction of irrigated areas.
• Unequal land distribution resulting into income inequality in rural
Pakistan.
• The deterioration of the land resource base.
• Unfavorable relative agricultural goods price.

Source: Agricultural Statistics of Pakistan, 2010-11.

Causes of failure in potential yielding: Major constraints to

rice production are as under:
• High cost or scarcity of land, water , labour and other inputs such
as fertilizers, pesticides and even high quality seed.
• The problems of flash floods, water logging/submergence due
to poor drainage.
• Continuous use of traditional varieties due to the non-availability
of seeds.
• Low and untimely rainfall.
• Delay in monsoon onset resulting into delayed seeding, late
transplanting and sub-optimium plant population.
• In the years of low rainfall, the crop failure due to drought etc.
•Yield decline due to late planting of crop as a result of delayed
availability of irrigation water and subsequent attack of rice
borers and white backed rice hoppers
SUGARCANE: A comparison of sugarcane yield in Pakistan
and some other cane growing countries is given in Fig- 8.
Figure-8: Comparison of Sugarcane Yield during the year 2010.

Improvements

following practices are required to be implimented in pakistan to
improve the yield.
o Multiple cropping system approach rather than a single crop
development approach.
o Cultivation of area specific crop production technologies in different agro climatic zones.
o Replacement of low potential/pest susceptible old varieties with
new high yielding varieties with promising potential.
o To encourage hybrid cultivation through demontrations and
making hybird seed available to the farmers.
o By adopting the appropriate sowing methods for crop establishment with desired level of plant population.
o Encouraging the use of machines along with the traditional
implements.
o Effective control of pests and diseases with timely and proper
application of pesticides.
o Adoption of proper post-harvest operations.

Source: Crop FAO STAT,2010.

With an area of 1.1 million hectares, sugarcane ranks as fourth major
crop of Pakistan and main source of sugar in the country. It is highly
water intensive and yet an important cash crop. It accounts for 6.2%
value added in agriculture and 1.5% in GDP. Punjab covers 64% of
the area and contributes 61% to the country's total cane production.
Sindh is the second largest cane-growing province with 25% of the
cane acreage. The national average cane yield is 47 tons per hectare and
is far below the existing potential. Fig-7 shows the sugarcane Pakistan.
With an area of 1.1 million hectares, sugarcane ranks as fourth major
crop of Pakistan and main source of sugar in the country. It is highly
water intensive and yet an important cash crop. It accounts for 6.2%
value added in agriculture and 1.5% in GDP. Punjab covers 64% of

ne major challenge faced
by urban planners and city
managers all through Karachi’s
various historical growth and
development phases has been
the exponential rise in population
caused mainly due to migration.
Even before the creation of
Pakistan, growth in population
was primarily due to migration
linked to economic and military
reasons. Being a port city having
a favorable climate, enhanced
Karachi’s economic potential,
while its strategic location added to its military significance. To
cite an example, during the 1911-41 thirty-year period Karachi’s
population increased by 133.4% and it has been estimated that
90% of the growth between 1921 and 1941 was the result of
migration.
As Arif Hasan, a noted development expert, has analyzed in
his work The Social Causes of Urban Change in Pakistan (2006),
during the period between the last two censuses we find that
38% of the population increase between 1981 and 1998 was
due to migration. It is estimated that 50% of this increase was
mostly due to migration from Pakistan’s rural and urban areas.
In addition thereto, between 1972 and 1978, an estimated
350,000 refugees from Bangladesh (formerly East Pakistan)
moved to Karachi, and between 1977 and 1986, about 300,000
Iranian and Afghan refugees also settled in the city in the wake
of the Soviet invasion of Afghanistan. One major challenge
that faced the government as a result of these phenomenal and
continued migration cycles, was providing housing/land tenure
and services to the migrating communities. One negative
impact of all this has been the proliferation of katchi abadis
(squatter settlements).
Migration waves and government response: Since 1947, a
number of master and structure plans prepared for Karachi
have largely failed to find a solution to the problem of squatter
settlements mainly due to the fact that they failed to account for
the significant interventions being made within the informal
sector, and based their work on an inadequate and faulty data
base. According to ‘Seven Reports on Housing’ by Arif Hasan, “in
the MRV Master Plan developed by Swedish consultants for the
Karachi Improvement Trust (KIT) in 1952, an adequate data
base was not established for the preparation of the plan with
the MRV plan being designed on the assumption that Karachi’s
population in the year 2000 would be 3 million, a figure which
was reached in the year 1969! In this plan, the decision makers
and planners focused on building houses for the migrant
settlers. However, the requisite finances for implementing the
plans were linked with the development of a new administrative
center in the city that never happened as a decision was made in
1958 to shift the capital of the city from Karachi to the newly
developed city of Islamabad’.
A new policy shift was also then witnessed when the first
Martial Law government in Pakistan decided that squatters in

by Farhan Anwar

the inner city areas gave the city
an ugly look, and needed to be
moved to the outskirts of the
city. This shift in the policy focus
got reflected in the Greater
Karachi Resettlement Plan that
was developed for the Government of Pakistan by the Greek
consulting firm Doxiades Associated in 1958. This planning
document proposed creation of
two new Townships – Korangi
and New Karachi on the outskirts
of Karachi (15-20 miles from the
city center) and in the vicinity of these townships, large industrial
areas were also planned and incentives provided to the industrialists to develop these areas. Clearance of the inner city slums and
shifting of their residents to the new sites was an integral part of
the plan. However, development in the industrial areas near the
townships did not materialize at the required pace. Thus 50% of
the people that were moved shifted back to squat in the city
center, or on the fringes of the city to stay close to their places of
work. As a consequence of the failure of this plan, a few critically
important processes, that are listed below were set in motion that
were to characterize the fault lines to be witnessed in all future
government attempts at providing low cost housing to the
landless in Karachi, till such time that regularization of katchi
abadis became part of government policy.
• Speculation in property: the people who moved back to the
city from the new townships sold their homes to speculators
who, in turn, settled middle income people in these houses.
• Lack of supporting financial mechanisms: Although there
was a heavy government subsidy in the development of the
townships, recovery from the users was negligible. In addition,
it was seen that in the absence of returns from the users, the
government could not raise finances from its own revenues to
sustain the settlement schemes.
The planning and implementation failures of the Greater Karachi Resettlement Plan clearly manifested that settlement and
providing security of tenure to the katchi abadi squatters was just
not a physical problem; instead, the sociological aspects and
providing financial sustainability to the initiatives were far more
critical in determining the chances of success and failure.
While the government had failed to develop a policy framework
to tackle the issue, it did reshape its approach – it shifted from
constructing houses to providing plots and services. The most
significant manifestation of this revised focus, that needs a
mention here, is the Orangi Metroville Project (1973). This was
a Utility Wall Development (UWD) scheme for 35,000 persons.
Roads, electricity, gas and sewerage were made available for its
4,133 plots. Plots for all civic amenities were planned, and the
location of their sites was in close proximity to an industrial
area. In addition, the price of the plots was kept at Rs 2,500.
However, the scheme failed to attract the target group; it was
planned that 94% of the plots in the scheme would be allotted
to persons with an income less than 1000 rupees per month.

51

August 2012

H ealth & Environment
However, people belonging to the middle class, who had mostly
purchased plots from the original allottees moved in and settled.
They demolished the utility walls and constructed houses
similar to the ones in the middle class areas of the city. The
reasons in this could be financial rather than anything else.
Residents who moved into the metroville had to bring in
contractors and materials from other areas of the city since no
such facilities were available within the metroville itself. This
process required substantial financial investments. A proposal
for setting up a ‘Housing Bank’ for assisting the lower income
plot owners with loans at low interests did not materialize, and
the only loans available were from the House Building Finance
Corporation (HBFC) where the loan disbursement mechanisms did not favor the poor.
Project, policy and interacting with stakeholders: The first
policy decision for providing an institutional basis within a
policy framework context to the issue of katchi abadis came in
1972, when the Federal Government initiated the Katchi Abadis
Improvement & Regularization Program (KAIRP), which
aimed to regularize 2,320 katchi abadis across the country
(having a population of 5.5 million) and to provide residents
with water, sanitation, electricity, road paving and other facilities
in lieu of payment of development charges (referred to as ‘lease
charges’). The impetus for this program came from populist
slogans of the government elected in the historic 1970 elections
that also bifurcated the country. The KAIRP led to enactment
of the Sindh Katchi Abadis Act-1987 that provided a comprehensive legal and administrative framework for the process of
regularizing the katch abadis. This provincial law (which was
mirrored by corresponding legislation in other provinces)
provided the buttress for a politically motivated announcement
on March 23, 1985 whereby all unplanned settlements of at
least forty households that were in existence on that day were
regularized. This law led to the formation of the Sindh Katchi
Abadis Authority (SKAA).
Hindrances in implementing SKAA mandate: Initially SKAA
faced a number of problems in fulfilling its mandate mainly
owing to the complications in procedures and processes that
were removed by working and learning with communities
through the incorporation of revised procedural mechanisms.
This revision in approach and strategy was adopted in 1994 and
as soon as the lease camps started working with the simplified
procedures, people thronged them to file applications for leases,
and to pay the lease money through challans. In less than eight
months, for the first time in its history, SKAA became
self-financing.
Conclusion: The changes made SKAA’s lease granting and
development procedures in 1994 were primarily structured to
achieve decentralization, and making the process participatory,
transparent and appropriately suited to the demands of the
targeted communities. The basic premise was to accept the
interventions and innovations based on the ground realities
pointed out by the communities, even though they didn’t
conform to any specified standards but only aligned the government procedures and development inputs to the realities on
ground in order to assure greater acceptability and improved
chances of sustainability of the actions taken.
As Haris Gazdar and Hussain Bux Mallah conclude in their
work Residential Security “Marginalization and Social Protection

(regularization) of unplanned housing in katchi abadis has been
an important factor in providing residential security to the
socially marginalized. It is quite clear that settlements, communities and individuals that have gained protection through the
government programs and laws for regularization are now in
possession of secure assets.” However, what needs to be
understood now is that, the availability of public land and
associated services and infrastructure cannot be unlimited.
Concerns about the future sustainable development of the city
are valid in the context of the uncontrolled urban sprawl of the
city with most of the development taking place in Karachi’s
peripheral areas being beyond the mandate of the government.
Another concern is that the relatively weak and lenient policy
towards housing and related regulation in Karachi continues to
contribute to facilitating migration from other parts of the
country, and also from other neighboring countries. While in
the early period of the city’s growth, most of the migrants
represented hard working, enterprising and creative people that
fitted and contributed well to the growth of the city. That is not
the case anymore; much of the present influx, it is being felt by
many, is politically motivated i.e. to take care of rival political
concerns, is interested in wrenching the demographics of the
city in their favor. It is high time we realized that regularization
must at a certain stage discourage the unsustainable sprawl of
the city that, if left unregulated, foretells serious consequences
for ensuring security to Karachi’s residents along with provision
of basic services and infrastructure commensurate with fulfilling the needs of a modern and sustainable metropolis.
Another important lesson is that for the success of an urban
development venture to have a wider impact, it has to be
embedded firmly within the larger canvas of the overall development dynamics of the city. While the process of giving land
to the landless is a learning curve – from thinking in terms of
projects to developing the policy and institutional frameworks,
and from a detached and bureaucratic planning approach to
linking it with communities and learning from experiences on
ground. Unfortunately, the overall planning process for the city
has failed to account for this parallel development processes
and to provide the necessary regulatory and environmental
safeguards to make the process manageable and integrated with
the formal planning processes. The result has been that, while
significant successes have been achieved, the city continues to
present a profile of inequitable growth, with access to land and
services being determined within the context of a dysfunctional governance scenario bereft of even the basic requirements of social and public accountability.

52

August 2012

S ocial Issues
Crime Against
Humanity

by Iftikhar Mobeen

D

escribed as the Palestine of Asia by the UN, the
Rohingya Muslim community in Myanmar is currently
going through an unutterable ordeal at the hands of the
Rakhine extremist Buddhists in Arakan who are targeting the
Muslim minority with the worst form of religious cleansing.
Branded by the United Nations as one of the most persecuted minorities of the world, Rohingyas are a Muslim
people living in the Rakhine State, located in west of Myanmar. With a population of 3 million, Rakhine state is
bordered by the Bay of Bengal to the west and the majority
of its residents are Theravada Buddhists and Hindus.
Ethnic cleansing is rife in Myanmar and is turning into a
human tragedy of colossal proportions. A confidential
United Nations report dated May 29, 2011 and marked
“Not for Public Citation or Distribution”, defines ethnic
cleansing as a “purposeful policy designed by one ethnic or
religious group to remove by violent and terror-inspiring
means the civilian population of another ethnic or religious
group from certain geographic areas”. The settlement of
the Rohingya Muslims in this region dates back to the
eighth century
The suppression of the Rohingya Muslims of the Arakan
region dates back to the World War II. On March 28, 1942,
about 5,000 Rohingya Muslims were brutally massacred by
the Rakhine nationalists in the Minbya and Mrohaung
Townships. After this worrying incident, the Muslims of
the region were frequently subject to harassment by the
Burmese government which has so far refused to grant
them official citizenship. According to the UN High Commissioner for Refugees, this lack of full citizenship rights
means that the Rohingyas should tolerate other abuses,
including restrictions on their freedom of movement,
discriminatory limitations on access to education, and
arbitrary confiscation of property.
It's said that as a result of dire living conditions and
discriminatory treatment by the government, some 300,000
Rohingyas have so far immigrated to Bangladesh and
24,000 of them also escaped to Malaysia in search of a
better life. Many of them have also fled to Thailand, but
neither Bangladesh nor Thailand has received them warmly.
Bangladesh is negotiating with the Burmese government to
return the Rohingyas and Thailand has sporadically rejected
the hopeless immigrants. There have been instances where
boats of Rohingyas reaching Thailand have been towed out
to sea and allowed to sink, sparking international anger
among Muslims and non-Muslims.
Human Rights Watch says that the government authorities
continue to require Rohingya Muslims to perform forced
labor. According to HRW, those who refuse or complain are
physically threatened, sometimes with death, and children as
young as seven years old have been seen on forced labor teams.
Dr. Mohamed Elmasry University of Waterloo professor
writing for The Egyptian Gazette, has enumerated the
different hardships the Rohingya Muslims have historically
undergone. He writes that they are subjected to various forms

of extortion and arbitrary taxation, land confiscation,
forced eviction and house destruction and financial restrictions on marriage. Rohingyas continue to be used as forced
laborers on roads and at military camps.
The Myanmar government's mistreatment of the Rohingyas, however, has long been contested and protested by the
international organizations. For several years, human rights
activists have decried the arbitrary measures leveled against
the Rohingya Muslims in Myanmar by the government and
the extremist Buddhists. In May 2009, Elaine Pearson, the
Human Rights Watch's deputy Asia director issued a statement in protest at the deteriorating conditions of the
Rohingya Muslims, calling on the Association of Southeast
Asian Nations (ASEAN) to press the Burmese government
to end its brutal practices: "the treatment of the Rohingya
in Burma is deplorable – the Burmese government doesn't
just deny Rohingya their basic rights, it denies they are even
Burmese citizens.". Rohingya Muslims who are denied their
basic rights, i.e. the right to freedom of movement,
marriage, faith, identity, ownership, language, heritage and
culture, citizenship, education etc. Deplorable as it is, the
Muslims in Myanmar are among the most persecuted
minorities in the world according to UN.
US photographer Greg Constantine has recently released a
book of black and white photography titled “Exiled to
Nowhere: Burma’s Rohingya.” He believes that “One of
the things that is lost in the discussions of the issues of
statelessness—particularly with the Rohingya—are human
stories.”
He relates the story of 20-year-old Kashida who had to
“flee to Bangladesh with her husband. The Burmese
authorities had denied her permission to get married, but
when they discovered she had married in secret and was
pregnant they took away all her family’s money and cows
and goats. They forced Kashida to have an abortion, telling
her: “This is not your country; you don’t have the right to
reproduce here.”
Now, the conflict has escalated in the Rakhine State again
and the Muslims are once more experiencing difficult days
as a black shadow of violence and unrest has been just cast
over their already trembling lives. It was on the reports that

53

August 2012

S ocial Issues
10 Rohingya Muslims were killed by a mob of 300 Rakhines
while on their way back from the country's former capital Rangoon. According to
Due to
a group of UK-based
discriminatory
NGOs, 650 Rohingyas
treatment by
were massacred from June
government,
10 to 28. The United
300,000 Rohingyas Nations estimates that
have immigrated between 50,000 and 90,000
Rohingyas were displaced
to Bangladesh
since the eruption of
and 24,000 of
in the Asian
them escaped to violence
nation. However, due to
Malaysia in
the absence of indepensearch of a
dent reporters and monibetter life
tors in the country, it's
impossible to verify the exact number of those who
have been displaced. It's also reported that some 9,000
homes belonging to the Muslims in the western state of
Rakhine were destroyed. On July 20, Amnesty International called the recent attacks against minority Rohingyas and other Muslims in Myanmar a "step back" in the
country's recent progress on human rights, citing
increased violence and unlawful arrests following a state
of emergency declared six weeks ago.
Unfortunately, the Myanmar peace prize laureate Aung
San Suu Kyi has turned a blind eye and a deaf ear to the
plight of the Rohingya Muslims. Maybe she has forgotten her own words on democracy and human rights that,
“The struggle for democracy and human rights in
Burma is a struggle for life and dignity.”
The Organization of Islamic Cooperation (OIC) has
voiced its concern over the recent violence in the state
of Rakhine and the varying reports which have leaked
out as to the number of the Muslims killed. As reported
by the TimeTurk News Agency, over 1,000 Rohingya
Muslims have been murdered thus far in the conflicts
broke out in the region.
The mainstream media in the West have been largely
silent about the massacre of Muslims in Myanmar and
the ordeal that has befallen them. They have found
other interesting topics to give coverage to, and as
always, bigotry against Muslims hardly moves them.
Amid the shameful silence of the Western governments
and their affiliated media who outrageously boast of
being independent and professional, it's a moral responsibility, not only for Muslims, but for all the conscious
citizens around the world, to stand shoulder by shoulder
with the subjugated Muslims of Myanmar and demonstrate that Islamophobic prejudice, intolerance and
discrimination will not remain unanswered. In view of
the ongoing inhumane violations in Myanmar, the US
and its western allies, which keep pontificating about
human rights in the world, have feigned ignorance about
this humanitarian catastrophe. Why?
It is certainly incumbent upon every person who cares
about human dignity to fly in the face of this inhumanity and give a helping hand to the downtrodden Myanmar Muslims.

Need for economic growth
and poverty reduction

P

opulation explosion is a serious problem that has caused to
a large number of people, running into billions, abject
poverty, starvation, malnutrition, diseases, illiteracy, lack of
access to healthcare, and a host of social, political and economic
injustice. According to estimates, the world population stood at
7,025,071 people as on July 9, 2012, a leap of over 2.5 times
over the last 50 years, while the earth’s resources remain finite.
There is therefore urgent need to focus attention on population
explosion in the context of overall development plans,
programmes and the need to find solutions for these issues.
In its decision in 1989, the Governing Council of the United
Nations Development Programme recommended that ,for
focusing attention on the urgency and importance of the
problems, July 11 should be observed by the international
community as World Population Day. This was done all over
the world including Pakistan.
But observing day is not enough; it requires much more than
that if poverty-stricken people are to be taken out of their
predicament. Economic growth is one of the solutions.
According to speakers at a seminar on poverty and inequality
organised by World Bank in Islamabad on July 26, 2012,
pro-poor policies and equitable growth are essential for vulnerable segments of society to catch up and not get permanently
left behind because of uneven playing field.
Pakistan’s growth had spurred during the period of wars in the
60s, 80s and 2000s, when the country received more foreign
inflows, observed the Federal Minister for Finance Abdul
Hafeez Shaikh adding that during the 80s, Pakistan had been
fighting the Afghan war and since the 2000s, the nation has been
an ally in war against terror; both times Pakistan saw huge inflows
from the US. He further reiterated the government’s resolve to
accelerate growth, reduce poverty and address inequality.
The Minister highlighted four measures the government has
introduced for bridging inequity: i) agricultural pricing policy
that helps the farming sector; ii) increased expenditures on
social safety nets with emphasis on better targeting of the
poorest and vulnerable segments of society; iii) under the new
formula for sharing federal resources with provinces the latter
have received a major boost in transfers; and iv) deliberate effort
is being made by the federal government to have regionally
balanced development of infrastructure throughout the country. He welcomed the World Bank’s initiative of expanding the
development discourse in Pakistan.
Speaking on the occasion, Farzana Raja, chairperson of Benazir Income Support Program (BISP) proposed that the
provinces should allocate certain funds out of increased share
of National Finance Commission (NFC) for social protection
policy. She also asked the corporate sector to contribute
towards social protection for the way forward to tackle the
arising situation. Francois Bourguignon, Director at Paris
School of Economics and an eminent authority on micro
determinants of poverty said: “Absolute poverty reduction has
to be the main goal of development; domestic policies can
reduce inequality without impairing growth.”

54

August 2012

S tock Market
Stock Market Review
- July 2012

Top five gainers scripts MoM
HCAR

29.3%

DGKC

17.3%

AKBL

14.4%

MCB

13.1%

UBL

13.0%

Top five loser scripts MoM
ENGRO

-7.9%

FFBL

-6.7%

EPCL

-5.5%

SHEL

-3.0%

KAPCO

-0.2%

50%

KSE100

40%

MSCI EM

MSCI FM

30%
20%
10%
0%

Jun-12

Apr-12

May-12

Mar-12

Jan-12

Feb-12

Dec-11

Oct-11

-20%

Nov-11

-10%
Sep-11

falling coal prices as well as
improvement in domestic demand
boosted performance of the 'Construction & Materials' sub-sector,
while banks rallied on better outlook
for 2QCY12 results. The Chemicals
sub-sector was the major underperformer in July primarily due to
below line earnings of FFBL as well
as growing concerns on ENGRO's
ability to repay its debt given the
cash flow constraints arising from
the severe gas curtailment. Within
the AKD Universe, HCAR (+29%),
DGKC (+17%) and AKBL (14%)
were the major outperformers while
the laggards list was headed by
ENGRO (-8%), FFBL (-7%) and
EPCL (-5%) respectively.
Outlook: Our near term outlook for
the market is positive given i) release
of CSF funds and ii) prospect of
monetary easing in the upcoming
monetary policy following below line
CPI reading for Jul'12, which came
in at 9.6%YoY, and was the first time
since Dec'11 that the CPI reading
has come in single digits.

Jul-11

he KSE-100 index rallied by
5.6% in the month of July and
in the process was the best performing market in the region. Furthermore, the KSE easily outscored the
benchmark MSCI-FM index, with
MSCI-Pakistan gaining by 6.1%
during the month compared with a
return of just 0.9% of the MSCI-FM
index. Thawing of relations between
Pakistan and USA was the main
reason behind the KSE price outperformance. In this regard, the two
sides have agreed on the reopening
of NATO supply routes, which is
expected to result in improved
foreign inflows to Pakistan, where
initial reports indicate an inflow of
US$1.1bn in CSF funds.
Market performance in numbers:
KSE-100 index closed the month at
14,577 points, representing an increase
of 5.6% MoM, while the CY12TD
gain stands at an impressive 28%.
Thawing of relations with the US
was reflected in foreign inflows, with
total inflows in July of US$31mn,
compared with an outflow of
US$109mn in the previous month.
Trading activity also gained some
momentum with average daily volumes
rising by an encouraging 11%MoM
to 90mn shares. Amongst the blue
chip sectors 'Construction & Materials' and 'Banks' were the notable outperformers. Improving prospects of
cement sector profitability following

Open:
83.68
Low: 83.68
Close:
87.45
High: 92.48
Change: + 4.51 %
Oil prices fell for a second consecutive
day on last trading day of the month on
speculation that the Federal Reserve will
be less likely to announce additional measures to stimulate the U.S economy.
Crude reduced the monthly gain to 4.51 %
in July, on the account that Fed will
probably forgo a third round of large-scale
asset purchases at a two-day meeting ahead.
During July-2012, the traded volumes at
the Exchange increased to Rs. 30.51bn
from Rs. 6.47bn in the corresponding
month of the previous year, a significant
growth of 371 % .

26-Jul

29-Jul

26-Jul

23-Jul

20-Jul

17-Jul

14-Jul

8-Jul

82

23-Jul

84

Open:
3,550
Low: 3,425
Close:
3,425
High: 3,575
Change: - 3.52 %
In the domestic markets a downward trend in
rice prices has been witnessed over the month
of July. Maximum price was Rs 3,575 per 100
Kg while the minimum price observed was Rs
3,425 per 100 kg showing a decrease of 3.52 %.

20-Jul

86

17-Jul

88

11-Jul

1580

8-Jul

90

SILVER [USD / troy Oz]

1590

5-Jul

92

14-Jul

GOLD [USD / troy Oz]

3,450
3,400

11-Jul

29-Jul

Low: 2,998
High: 3,087

3,550
3,500

8-Jul

Open: 2,950
Close:
2,946
Change: - 0.14 %

26-Jul

23-Jul

20-Jul

17-Jul

14-Jul

8-Jul

11-Jul

5-Jul

2-Jul

2,910

IRRI-6 RS/100 kg
3,600

5-Jul

2,950
2,930

IRRI 6 [Rs. / 100 kg]

2-Jul

2,990
2,970

Open:
27.36
Low: 26.67
Close:
28.20
High: 28.33
Change: + 3.07 %
Silver gained 2 percent to $ 28.20 on last trading
day of July, resulting in an increase of 3.07 %.
During July 2012, the traded volumes at the
Exchange decreased to Rs. 5.07bn from
Rs.7.90bn in the corresponding month
previous year.

after a string of weak U.S. economic
indicators boosted expectations that the
Federal Reserve was exploring new ways
to support growth
Interest in physical gold remained lackluster, with demand from major consumer,
India, crimped by higher prices and the
world's largest gold-backed, exchangetraded fund, SPDR Gold Trust, set for its
biggest monthly outflow this year in July.
During July, 2012, the traded volumes at
the Exchange increased to Rs. 68.28bn
from Rs. 37.89bn in the corresponding
month of previous year, witnessing a
significant growth of 80.22 % .

5-Jul

or the first time in more than two
years, commodities, equities, bonds
and the dollar posted gains. Raw materials
led the increase as the Standard & Poorâ&#x20AC;&#x2122;s
GSCI Total Return Index of 24 raw
materials rose 6.4 percent in July. The
MSCI All-Country World Index of
equities rallied at the end of the month for
a 1.4 percent gain. The Dollar Index, a
measure against six currencies, added 1.3
percent. Bank of America Merrill Lynchâ&#x20AC;&#x2122;s
Global Broad Market Index shows that
bonds of all types posted a return of 1.4
percent on average.
During July-2012, the traded volumes at
the Exchange increased to Rs. 103.87bn
from Rs. 52.27bn in the corresponding
month of the previous year, a growth of
98.72 % witnessed vis a vis july, 2011.

2-Jul

F

by Raede Latif

Open: 4,930
Low: 4,750
Close: 4,775
High: 5,000
Change: - 3.14 %
Malaysian crude palm oil edged lower on last
trading day of July, posting its third successive
monthly loss. Benchmark October palm oil
futures on the Bursa Malaysia Derivatives
Exchange lost 0.8 percent to close at 2,980
ringgit ($953) per ton.
A downward trend was seen in the domestic
market. An overall decline of 3.14 % was
observed in the month of July, 2012.
Maximum price Rs 5,000 was on 6th of July
and minimum price of Rs. 4,750 per 37.324
kg was noticed on 30th of the month.
August 2012

E ducation & Training
Innovationthe key to success

by Ferozeali Hussaini

I

nnovation is the process of using
intellectual resources to create new
products or services capable of generating positive business results. Peter
Drucker defines innovation as “the
specific instrument of entrepreneurship... the act that endows resources
with a new capacity to create wealth.”
In other words, innovation may be
referred to as ‘creation of better or
more effective products, processes,
services, technologies or ideas made
available to the markets and the society’
for archieving positive results.
Innovation may thus be considered as
conceiving new ideas leading to the
creation of a new product, process or service. It is not just
the invention of a new idea that is important; it is actually
“bringing it to market”, putting into practice and diversifying
it in a manner that leads to new products, services or systems
that add value or improve quality. It may involve technological transformation and management restructuring. Innovation also means applying new technology and employing
out-of-the-box thinking to generate new value and to bring
about significant changes in society.
Innovation is an important topic in the study of economics,
business, entrepreneurship, design, technology, sociology,
and engineering. It is the key factor in society and economy.
In society, innovation aids in comfort, convenience, and
efficiency in everyday life while in business, innovation
serves as a catalyst to growth for achieving financial returns.
There are different kinds of innovation. They include, for
example:
• Computer printer
• Microprocessor chips
• Personal/laptop computers • Email
• Word processing software • Google search
• iPod and iTunes
• Microwave oven
• WiFi
• Spreadsheet software
• Social networking
• Mobile phones
• Disposable baby diapers • Energy sources i.e. wind
turbines and solar panels
• The World Wide Web /
• Global Positioning or Satellite
Internet
Navigation systems
• Digital cameras
This is of course not a definitive list. New breakthrough
innovations will continue to emerge over time.
The Importance of Innovation in Entrepreneurship
Innovation has long been accepted as an important driver
of modern economy. The economy consists of enterprises and
businesses. Without them, our economy would not survive. But
a business must also sustain itself, be able to constantly evolve
to fulfill the demands of the community and the people. In
every business, it is imperative to be industrious, innovative
and resourceful. Entrepreneurship produces financial gains and
keeps the economy afloat, which gives rise to the importance
of innovation in entrepreneurship. In other words, entrepreneurs

are innovators of the economy.
Companies and enterprises keep
innovation as goal of their organization. Innovations contribute to the
success of the company. Other
factors that add to the importance of
innovation in business and entrepreneurship is competition; it stimulates
any entrepreneur to come up with
innovative products or services
which are better in quailty and are
also cost-effective.
Innovation Process: A business
survives on the basis of its ability to
bring the right products or services
to the right market, at the right time.
With their budgetary constraints and cut-throat competition for survival and growth businesses are under constant
pressure to develop inovative products that are competitive
in quality and cost-effective too. For achieving this goal
there has to be a prefect combination of innovation, profitability and customer engagement.
To create and sustain innovative products or services,
businesses need to maintain strategic clarity on:
1- the purpose - to know exactly and clearly what is important for the business to sustain and grow;
2- deployment of resources;
3- the process to be used.
The process of innovation is a structured action that can be
put to implementation easily. In business and economy, the
process of innovation is the adoption of technologically
new or significantly improved production methods. These
methods may involve changes in equipment or production
organization or both. The methods may be intended to
produce new or improved products, which cannot be
produced using conventional plants or production methods, or essentially to increase the efficiency of existing
products. This includes significant changes in techniques,
equipment and/or software.
The core of the innovation process is formed by the
company and its employees. Factors affecting the innovation process from the outside include: strategy and structure, which strongly determine the contours of innovation
process from the centre:
• customers' needs,
• the benefits for the customers,
• global and technological trends,
• behavior of the competitors,
• requirements of the families of entrepreneur and employees,
• the needs of intermediaries (distributors and resellers),
• the needs of network partners.
An important step in the development process of an innovation is to evaluate it with the help of a business case. The
following points are evaluated:

57

August 2012

E ducation & Training
• Aims: What is the basic aim and what are customer benefits
of the innovation?
• Status quo: What is new about the idea? Which components exist already?
• Strategy: Does the implementation strategy correspond to
the general corporate strategy?
• Risk: Which risks have been identified? What are the consequences for the project? How likely is it that any of the
risks will crystallize?
• Resources: What staff resources as well as technological,
financial, structural and knowledge-/experienced-based
resources will be used and bound by the project??
• Economic importance: What is the market potential? What
is the effect on liquidity planning? How are distribution and
sales organized?
• Perspectives: What perspectives does the innovation open
up for the company, the customers, the competition?
• Project plan: What is the course of action, what are the
responsibilities and what is the time frame necessary for the
realization of the innovation?
Is your company ahead of the game or not? Every
business lives or dies on its ability to bring the right products
or services to the right market at the right time. To do this,
companies have to consistently achieve the right combination of innovation, profitability and customer engagement.
Important Steps - Creating an Innovative Organization:
According to a global study by IBM, today's CIO spends an
average of 55% of his or her time on activities that spur
innovation, and the key component underpinning all
successful innovations is the business model. For a business
model to be of value, it must have three core elements: a
unique central idea that defines who you are, a grasp of
future market trends, and profitability from either lower cost
base or an offering that cannot be easily copied. Implementing a differentiated business model can successfully unite
silos across the enterprise, turn around opportunities faster,
get customers to stay longer and pay a premium, resolve
internal crises quicker, and better leverage the allocation of
resources.
The solution is a combination of insights from Booz &
Company, Michael Porter, and Philip Kotler that can guide
organizations to conquer the challenge of building a
business model geared for innovation and business transformation:
1. Know Thyself ? The first step of this process is a crucial
assessment of what business you are in, how the business is
differentiated, and if and why it is trapped in price competition hell. It is then a question of knowing the appropriate
innovation strategy for an ambitious, audacious, and imaginative response.
2. Ideation: The second step is to create a simple idea with
sophisticated delivery by looking at the business from the
outside-in, not the inside-out. Often, existing customers are
not visionaries and cannot imagine beyond their existing
experiences, so it is essential to realize that innovation needs
to be market-driven, not solely customer-driven. Apple has
built an empire from anticipating market needs. Steve Jobs
wanted customers to have memorable experiences when
they tried something new on an Apple device.

3. Redefine the business: The third step of creating a new
business model is to redefine the business you are in and ascertain whether the aims are to attract more users and/or devise
new uses for the product, service, or experience that will be
innovated.
A robust plan must also cover government regulations and
laws currently in the market space; an essential component
often overlooked. "When evaluating countries for investment
or opportunities, look first at a country's geopolitical stability
and its laws protecting property rights: these issues tend to
provide a better long-term view on market risk and opportunity than economic indices.”
4. Lead, Follow or Get out of the Way?: The fourth step
requires forming a strong leadership team with a shared vision
that will be at the center of the business, balancing contention
with compromise while simultaneously maintaining focus on
the brand and business goals. Contrary to popular belief,
business innovation is not about isolation and competition; it
is more often about cooperation and collaboration inside the
business. This is best achieved by treating the leadership team
as venture capitalists who have a stake in the program's
success. Therefore the leadership team needs to define the
overarching ambition for the business that can help steer the
future and act as a compressed management tool when making
decisions.
5. Big Results Require Big Ambitions: The fifth step
frames the financial and strategic objectives of the business.
Jim Collins, author of Good to Great and Built to Last, asserts
that "a conservative, disciplined approach to growth is a critical
factor in sustaining a great business model. Though it may
seem counterintuitive, great companies willingly leave shortterm growth on the table if it means abandoning proven methods of long-term growth." Business innovation is not about
isolation and competition; it is more often about cooperations
and collaboration in the business.
According to McKinsey, 84% of executives believe innovation is extremely important for their company's growth
strategy. However, the successful implementation of innovative products, services, and experiences is a road paved with
strain and failure. While building the business, do not let
short-term growth override the long-term vision. This
approach downgrades immediate appetite for returns in
favour of a strong future.
6. Don't be Let-down: The secret of business innovation is
to think big, act small, fail fast and learn rapidly. Former IBM
CEO Lou Gerstner said business transformation “requires
focus, leadership, and commitment to create an authentic
community of motivated thinkers and doers that can open
new channels for the business and industry."
Conclusion: Innovation must have a place within the strategic
orientation of a business. As a basic principle: Innovations are
not miracles; they are not sudden inspirations from outside or
from above. They are the product of a systematic process. In
short, entire new industries and many existing ones have transformed to become creators of valuable ideas and experiences.
Increasingly, civilization must organize itself to maximize the
generation of new and better ideas, creating the infrastructure,
education systems, and innovative organizations that will solve
problems and create value to change the world.

58

August 2012

E vents
London Olympics opening ceremony –
a great historic moment

L

ondon 2012 Olympic Games
started off with a grand
ceremony welcoming the athletes
from more than 200 nations. For
London, this is an historic occasion as
it is the third time the UK capital is
hosting the world’s biggest and most
important sporting event. The Queen
opened the Olympic Games for the
second time in her 60-year reign after
a spectacular ceremony. Prime Minister David Cameron and US First Lady
Michelle Obama, accompanied the
Queen. Entitled Isles of Wonder, the
opening ceremony was directed by
Oscar-winning Boyle with the aim of
celebrating all things British and charting the nation's history. Director
Danny Boyle's £27m production
kicked-off London 2012 with imagination, style and a very British sense
of humor.
According to BBC, it attracted a UK
TV audience of 26.9 million, - more
than four times the number that
watched the opening ceremony in
Beijing four years ago. An estimate of
over a billion viewers worldwide
watched the Opening Ceremony,
which reflected the key themes and
priorities of the London 2012 Games,
based on sport, inspiration, youth and
urban transformation. The main
theme of the Ceremony was 'this is
for everyone'. From the industrial to
the digital revolution, the Ceremony
celebrated how Britain has contributed to the world. The Ceremony also
celebrated Britain’s free health service,
the National Health Service (NHS)
and paid tribute to Britain’s contribution to a modern world.
At its heart was a show-stealing
performance by the Queen who made
her movie acting debut alongside
James Bond star Daniel Craig but
appearances from Bradley Wiggins,
Rowan Atkinson and David Beckham
added to the occasion, showcasing
British talent and a sense of fun.
The Ceremony featured a volunteer
cast of more than 7,500 volunteer
performers who gave up their
weekends and evenings to take part
in a total of 248 rehearsals at two
east London rehearsal sites and at the

Stadium. Artistic Director of the
Olympic Games Opening Ceremony,
Danny Boyle said: ‘Our show was
really the volunteer’s show. If you
want to judge us as an island, these
people are the best of us, and we hope
the feeling of the show was a celebration of their generosity.’
A short while before the show began
the Red Arrows flashed across
London in a thrilling flypast, leaving
behind red, white and blue trails of
vapor. The world-famous RAF aerobatics team flew above the capital at
exactly 8.12pm - 2012 on the 24-hour
clock.
It started with the ringing of a giant
bell by cycling hero Wiggins, who last
weekend became the first Briton to
win the Tour de France. The stadium
was then turned into a 'green and
pleasant land' with hills, a cottage and
people enjoying an idyllic version of
British life. Animals including 12
horses, three cows, two goats, 10
chickens, 10 ducks, nine geese, 70
sheep and three sheep dogs also
appeared in these opening scenes. The

59

peace was shattered as the age of
industry sprouted from the ground
with loud banging. A cast of hundreds
swarmed on to the centre of the arena
as the darker, grimier, urban landscape
emerged, with giant smoking chimneys rising up from the ground.
The athletes from all over the world,
paraded in front of the audience.
Pakistani athletes preferred the national
dress Shalwar Kameez and projected
the national culture. Mystery surrounded as to who would perform the
ceremonial event, with Sir Steve
Redgrave, Sir Roger Bannister and
Daley Thompson all tipped as
contenders - but the honor became the
lot of seven talented young athletes.
Before leaving for east London, the
Queen and Prince Philip held a reception for foreign heads of state and
VIPs at Buckingham Palace. David
Cameron said Britain was ready to
welcome "the greatest show on Earth",
adding: "This is a great moment for our
country, so we must seize it." The show
has been praised by those who travelled
from all around the world to see it.
August 2012

E vents
My Karachi –
Oasis of Harmony

T

exhibition halls. Largest presence
of foreign delegates in the
exhibition was from India with
20 exhibitors led by former
Mumbai Chamber of Commerce
president Ashok Kumar Bharat.
In the Indian pavilion 8 brands
participated including Forbes,
TATA Chemicals, EurekaForbes,
Venus Lifestyle and others. The
exhibitors from Indonesia also
participated. High level business
delegations from India and
Afghanistan visited the exhibition for B2B meetings. Indian
exhibitors received very encouraging response from the visitors
including the Pakistan and Afghan
buyers and international participants maintained successful B2B
and B2C interaction.
Ashok Barat stated BombayKarachi Joint Chamber was
formed on the initiative of Indo-Pak Commerce Ministries.
It was a productive move, he said, towards boosting
trade between the two port cities of neighboring India
and Pakistan. He also invited KCCI to organize an exhibition of Pakistani products with the collaboration of
Bombay Chamber in Mumbai.
Sindh Industries Minister Rauf Siddiqui said that an
effluent treatment plant will be completed at Kotri
Industrial Area with Turkish support next month.
Various prominent personalities including Federal Minister for Overseas Pakistanis Dr. Farooq Sattar, Acting
Speaker, Provincial Assembly of Sindh Shehla Raza,
Coordinator to Chief Minister Sindh Sharmila Farooqi
and MNA Khawaja Sohail Mansoor also visited the
exhibition. From Diplomatic Corps, Consul General of
Turkey Murat M. Onart, Consul General of Japan Masaharu Sato, Consul General of Indonesia Rossalis
Rusman Adenan, Deputy High Commissioner of
Bangladesh Ruhul Alam Siddique, Commercial Counsellor of Vietnam Nguyen Hong Tien and Diplomats of
Russia, France, Korea, Sri Lanka and Afghanistan also
graced the occasion with their presence.
The exhibition attracted a large number of men, women
and children from all walks of life. purchasing for forth
coming Ramazan and Eid. Stalls of garments, readymade
garments, food items, cooking oil, cosmetic, mobile
phone etc attracted a huge crowd.. Huge rush was seen
at ‘house of italia’ oil stall and food and beverages stalls.
Since inception, My Karachi Exhibition has been
portraying a positive image of Karachi as a hub of financial activities in Pakistan as well as a promising land of
opportunities.

he “9th My Karachi – Oasis
of Harmony” Exhibition,
organized by Karachi Chamber
of Commerce & Industry, held
from 13th to 15th July, 2012 at
expo center was well attended by
public and corporates from leading FMCG sector. This annual
event was co-hosted by the,
Sindh Government, and City
District Government, Karachi.
The vision of “My KarachiOasis of Harmony” Exhibition
was to rebuild the image of
Karachi and to give positive
signals to the foreign entrepreneurs that the industrial and
commercial activities are going
on smoothly in Pakistan particularly in Karachi. Yet another
objective underlying the organization of this event was to
ensure that corporate entities
meet and strengthen relationships with the foreign
counterparts and enhance the image and prestige of
Pakistan and Karachi. The exhibition was inaugurated
by Chief Minister Sindh, Syed Qaim Ali Shah, accompanied by Rauf Siddiqui, Provincial Minister for Industries and Commerce along with President KCCI, Mian
Abrar Ahmed and other dignitaries.
In his inaugural address, the Chief Minister of Sindh,
Syed Qaim Ali Shah underlined the need for establishing SMEs and promoting the pivotal role of this sector
in the country’s economy. He said, “The Karachi
Chamber of Commerce and Industry (KCCI), Commerce International and the business community
should extend special emphasis to promote the SME
sector as I would recommend the concerned circles of
the government to establish more SME zones with one
dedicated SME zone for women entrepreneurs.”
Mian Abrar Ahmad, President KCCI, reiterated his
view that Pakistan did not need aid but trade and this
perception of Pakistan needs to be depicted worldwide
effectively.
He said that KCCI had gone international with the
formation of Pak Afghan and Bombay Karachi Joint
Chamber which aimed to play an enterprising role in to
promoting regional trade particularly in SAARC block
and generally with ECO, GCC, ASEAN and Central
Asian Trading blocks.
More than 7000 people visited the exhibition in three
days. An important feature of the exhibition was the
participation from regional countries such as India,
Indonesia, Sri Lanka, Vietnam and Afghanistan etc
displaying their products at more than 200 stalls in four

Noted banker Dr Asif A Borhi has been
appointed the Chief Operating Officer
(COO) of National Bank of Pakistan
(NBP). He is also appointed the Chairman
of the Board of the subsidiaries: NBP
Exchange Company and NBP Capital
Limited. Dr Brohi has rich experience of
banking and administration. Previously, he
was serving as Group Chief, Commercial
& Retail Banking, NBP. Dr Asif Borhi
joined NBP in 1984 and held numerous
Senior Management positions at the
Regional and Head Office levels including his last assignment as
Group Chief Operations. He holds a Bachelor's Degree in Law
and a Master's Degree in Literature from the University of Sindh
and a Master's Degree in Business Administration from USA and
a Doctorate in Public Administration from Karachi University.

NBP has received "Pakistan Deal of the
Year Award 2011"
National Bank of Pakistan (“NBP”) has received "Pakistan Deal of
the Year Award 2011" for acting as Inter-creditor Agent as well as
Lead Arranger & Advisor with regard to financing of two
Renewable Wind Energy Power Projects of 50 MW each in the
country. The two power projects are Pakistan’s first ever 100%
Islamic financed Renewable Energy Power Projects. This has
also set a new precedent in terms of Islamic financing structure
in the local banking sector. The deal included arrangment of
PKR 6 billion under Musharaka (Shirkat ul Milk) Finance
Facility with a consortium of local banks and a foreign debt
component of USD 134 million being provided under Ijarah
Finance Facility by Asian Development Bank (“ADB”) and
Islamic Development Bank (“IDB”) whereas NBP has acted as
Inter-creditor Agent for both local and foreign lending group.

Prof. Dr. Nasim A Khan, Vice Chancellor, Hamdard University is giving
his book on Solar Energy to eminent Social Worker and Chairman, Hilton
Pharma Sardar Yasin Malik during his visit to Hamdard University.

elix Baumgartner, termed as â&#x20AC;&#x153;Austrian DareDevilâ&#x20AC;? by international media, jumped
from a balloon flying at an altitude more than 18 miles above Earth, on 25th July, 2012,
falling at speed topping 500 miles per hour (805 kilometers per hour) in a training run for
his attempt to make the worlds highest skydive. He landed safely in a desert near Roswell,
New Mexico after leaping from an estimated 96,940 feet wearing a pressurized space suit
equipped with an oxygen supply.
A helium-filled balloon lifted Baumgartner into the sky carrying him in a pressurized capsule.
He executed a free fall of 3 minutes and 48 seconds, reaching speeds of 536 mph, according
to Red Bull Stratos, a project using the jumps to gather medical and scientific research data.
Baumgartner, aged 43, is making final preparations to break the record held by skydiving legend Joe Kittinger, a retired U.S. Air Force colonel. Kittinger's record -- for freefalling from 102,800 feet, or more than 19 miles -- has been revered in the aviation
community since it was set in 1960. At the time, no one knew whether a human could survive such a leap.
Now, with Kittinger himself serving as mentor, Baumgartner plans to shatter that record with a free-fall from 120,000 feet up, just
over 22 miles. Baumgartner will be wearing a custom-made body suit that aims to allow him to travel faster than the speed of sound.
Baumgartner's team of international experts in medicine, science, engineering, aviation and design is looking for the perfect
three-day weather window -- when the skies will be clear, with little wind and low humidity -- and then make the leap.
When Baumgartner tries to break Kittinger's record, he'll be using a pressurized capsule attached to a high-altitude helium
balloon for a "stratospheric flight" to more than 120,000 feet. He will then exit the capsule and jump -- protected only by a
pressurized 'space' suit and helmet supplied with oxygen -- in an attempt to become the first person to break the speed of
sound and reach supersonic speeds in free-fall before parachuting to the ground. In the past, Baumgartner has also jumped
from Malaysia's Petronas Towers and Taiwan's Taipei 101, two of the world's tallest buildings.

Micro-drones: The new face of
cutting-edge warfare

F

ar from the aero plane-sized craft that are the face of cutting-edge warfare, a much
smaller revolution in drones is under way. Micro-aerial vehicles (MAVs) with uncanny
navigation and real-time mapping capabilities could soon be zipping through indoor and
outdoor spaces, running reconnaissance missions that others cannot. They would allow
soldiers to look over hills, inside buildings and inspect suspicious objects without risk.
Now researchers led by Roland Brockers at the NASA Jet Propulsion Laboratory in
Pasadena, California, have developed a MAV that uses a camera pointed at the ground
to navigate and pick landing spots. It can even identify people and other objects. The
system enables the drone to travel through terrain where human control and GPS are unavailable, such as a city street or
inside a building.
A human operator needs to tell the drone only two things before it sets off: where it is and what its objective is. The craft
figures out the rest for itself, using the camera and onboard software to build a 3D map of its surroundings. It can also avoid
obstacles and detect surfaces above a predetermined height as possible landing zones. Once it selects a place to put down,
it maps the site's dimensions, moves overhead and lands.
In a laboratory experiment, a 50 centimetre by 50 centimetre quadrotor craft equipped with the navigation system was able
to take off, travel through an obstacle-filled indoor space and land successfully on an elevated platform.
With such capabilities making their way into ever smaller craft, it may not be long until the PD-100 Black Hornet (pictured),
which is set to become the world's smallest operational drone, gets an upgrade as well.
As it stands the PD-100, which has been in testing by Norwegian manufacturer Prox Dynamics since 2008, can navigate
autonomously to a target area using onboard GPS or fly a pre-planned route. It can also be controlled by a human from up
to a kilometre away, has an endurance of up to 25 minutes, can hover for a stable view, and fly both indoors and out.
Just 20 centimetres long and weighing about 15 grams, the PD-100 makes the drone created by Brockers's team look like a
behemoth. And while it may look like a toy, Prox Dynamics claims it can maintain steady flight in winds of up to 5 meters
per second. This has attracted the attention of the UK Ministry of Defence, which last year issued a request for the vehicle
under the name "Nano-UAS".

cyberspace security expert said he received a series of emails from an Iranian
nuclear scientist complaining that computers at two plants bizarrely began playing
a heavy metal anthem over the weekend.
The attack caused computers at the Natanz and Fordo nuclear plants to blast the metal
anthem “Thunderstruck” by arena rock gods AC/DC at full volume in the middle of
the night, the emails said. It also reportedly shut down “part of the automation
network,” said Mikko Hypponen, a Finnish computer security expert who has advised
governments on cyber-security. Hypponen, the chief research officer at F-Secure, a
well-regarded Finnish computer security firm, announced in his blog that he had received the emails from a scientist at the
Atomic Energy Organization of Iran.
One of the emails stated: “I am writing to inform you that our nuclear program has once again been compromised and
attacked by a new worm with exploits which have shut down our automation network at Natanz and another facility Fordo
near Qom.”
It continued: “According to the email our cyber experts sent to our teams, they believe a hacker tool Metasploit was used.
The hackers had access to our VPN. The automation network and Siemens hardware were attacked and shut down. I only
know very little about these cyber issues as I am a scientist, not a computer expert.”
The email concluded: “There was also some music playing randomly on several of the workstations during the middle of
the night with the volume maxed out. I believe it was playing ‘Thunderstruck’ by AC/DC.”
In 2010, US Special Forces in Afghanistan blasted Metallica and Thin Lizzy, AFP reported, when fighting the Taliban in
Marjah. The approach included blasting a playlist that continued for hours on powerful speakers in an effort to subdue the
Taliban, who hated the music.
Coincidentally, the head of Iran’s Information Technology and Communications Organization, Ali Hakim Javadi, urged the
United Nations to condemn organized cyber attacks.
He indicated that “high-cost viruses,” like Stuxnet and Flame, for example, were not made “by a single individual,” and that
international bodies must confront them together, the state-run IRNA news service reported on 25th July.
Israel and the United States were fingered for the Stuxnet and Flame viruses, though they have never admitted culpability.
Flame was touted as “the most sophisticated cyber virus ever” when it hit systems in Iran and across the Middle East in
May. It was said to be 20 times as powerful as Stuxnet, which, in 2010, caused some Iranian nuclear centrifuges to fail.

World's biggest hydroelectric plant
fully operational

A

fter 19 years of construction, the Three Gorges Dam, the world's largest hydropower project, started working at full capacity on 25th July, 2012 as the last of its
32 turbine generators was put into operation. The first generator went into operation
on July 10, 2003. The last one, or the No. 27 unit, is one of six generators that make up
the dam's underground power plant. The Project was launched in 1993 with a budget
equivalent to 22.5 billion U.S. dollars.
The Three Gorges Dam's generators have a combined generating capacity of 22.5
million KW. The dam also has two smaller power plants, each having a generation
capacity of 50,000 kilowatts (KW)."The full operation of the generators makes the Three Gorges Dam the world's largest
hydropower project and largest base of clean energy," Zhang Cheng, general manager of China Yangtze Power Co. Ltd.,
the operator of the generators, said in a ceremony. The Chinese government regards the project as a historic engineering,
social and economic success, with the design of state-of-the-art large turbines, and a move toward limiting greenhouse gas
emissions. However, the dam flooded archaeological and cultural sites and displaced some 1.3 million people, and is causing
significant ecological changes, including an increased risk of landslides.
Made of concrete and steel, the dam is 2,335 m (7,661 ft) long and the top of the dam is 185 metres (607 ft) above sea level.
The project used 27.2 million cubic metres (35.6×106 cu yd) of concrete (mainly for the dam wall), 463,000 tonnes of steel
(enough to build 63 Eiffel Towers) and moved about 102.6 million cubic metres (134.2×106 cu yd) of earth. The concrete
dam wall is 181 metres (594 ft) high above the rock basis.

63

August 2012

D iscovery
NASA finds lost spacecraft Mysterious building found
on dark side of the moon

B

NASA

ritish archaeologists have unearthed the remains of a mysterious prehistoric structure that might be older than Egypt’s
pyramids. Discovered during work at a housing development in
Monmouth, Wales, the bulky feature consists of a series of trenches
possibly housing the timber foundations of a massive building.
Made from what seems to be entire tree trunks, the sleeper beams
are huge, measuring more
than 50 ft in length and
more than 3 ft across.
Experts believe the
structure could date to at
least the Bronze Age, but
could be early Neolithic,
about 6,500 years old, thus
predating Egypt's pyramids by about 2,000 years.
Speculations range from interpreting the structure as the foundation
of an early Neolithic long house to seeing it as a large platform
constructed on water-saturated soil.
Radio-carbon tests of the foundations are being carried at the
moment. Results are expected within a couple of weeks.

scientists have found the crash site,
pictured above, of a spacecraft set into
orbit during the early 60s. They believe it is the Lunar
Orbiter 2 which disappeared back in 1967 during a
passage over the far side of the moon, when the craft
went out of telescope and radio range.
The primary function
of Lunar Orbit 2′s was
documenting areas of
the moon that would
be most hospitable to
the
Apollo
and
Surveyor
missions.
During its run, it
returned a total of 609
high resolution images and 208 medium-sized frames.
The wreckage is thought to have been located by the
Lunar Reconnaissance Orbiter (LRO) which is currently
mapping the lunar surface in unprecedented details. One
of its key findings is our solar system’s coldest spot: a
crater near the moon’s North Pole recorded at minus 415
degrees Fahrenheit.

Drilling discovers ancient
Antarctic rainforest

D

rilling of the seabed off Antarctica has revealed that rainforest grew
on the frozen continent ,52 million years ago, scientists said on 2nd
August 2012, warning it could be ice-free again within decades.
The study of sediment cores drilled from the ocean floor off Antarctica's
east coast revealed fossil pollens that had come from a "near-tropical"
forest covering the continent in the Eocene period, 34-56 million years
ago.
Kevin Welsh, an Australian scientist who travelled on the 2010 expedition,
said analysis of temperature-sensitive molecules in the cores had showed it
was "very warm" 52 million years ago, measuring about 20 degrees Celsius
(68 F).
"There were forests existing on the land, there wouldn't have been any ice,
it would have been very warm," Welsh told AFP of the study, published in the journal Nature.
The findings are very significant in understanding future climate change, particularly given how important Antarctica and
the very large volume of water stored on its surface would be for the entire planet. It shows that if we go through periods
of higher CO2 in the atmosphere it's very likely that there will be dramatic changes on these very important areas of the
globe where ice currently exists.
If we were to lose a lot of ice from Antarctica then we're going to see a dramatic change in sea level all around the planet.
Even a few metres of sea level rise would inundate "large portions of the habitable land around coasts of many major countries and low-lying regions.
The ice on east Antarctica is 3-4 kilometres (1.9-25 miles) thick, and is thought to have formed about 34 million years ago.
Welsh said there would also be major impacts to global temperatures were the ice to recede, because it is an integral cooling
mechanism for the planet, regulating the temperature by reflecting the sun's energy into space.

64

August 2012

H istory
‘Direct Action Day’
and the birth of Pakistan

A

ugust is a month of historical significance for the Indo-Pak subcontinent,
not just because it was partitioned in this
month in 1947, but also because the
Muslim League’s final decision to seek
nothing short of Pakistan was taken in
this very month in 1946. Although the
onset of WW-II had built pressures on the
British rulers of India to unite the Congress
Party and Muslim League, the first ‘elected’ Prime Minister
of India thwarted those efforts.
After Japan’s entry into WW-II, and its quick conquest of
Burma and its possible invasion of East India thereafter, it
was time to check the rise of dissidents in India to let the
British focus on preparing for a Japanese invasion. Pressed
by the Labour and Liberal members of his coalition regime,
as well as his American allies, Churchill reluctantly conceded
that some steps should be taken to break the deadlock over
self-rule being demanded by the Indians.
In 1942, Churchill had told Lord Amery “I hate the Indians;
they are a beastly people with a beastly religion.” It was this
mindset that aroused the Indians against the British, and the
pressures created by WW-II required a handicapped Britain
to muster the support of its badly managed colonies to
fight the Axis powers. Subash Chandra Bose created the
Indian National Army – an outfit in which the second in
command was an India Muslim. This development posed a
challenge to British Army in containing the Japanese
Army’s advance towards Aasam.
It was a tough scenario for the British Viceroys, who were
trying their best to face up to two challenges: containing the
Japanese advance, and bringing together the Congress and
the Muslim League to agree on keeping India united and
turning it into a democracy. In 1946, Congress agreed with
the Muslim League that, one third seats in the parliament
would always be reserved for Indian Muslims. Relying on
this commitment, the Muslim League agreed to forego its
demand for Pakistan.
With great difficulty, Jinnah was finally able to convince the
Muslim League to do so, and the agreement with Congress
Party was the basis of the elections in 1946 that installed the
first elected government in India, and Pundit Nehru
became its Prime Minister. But, in an historic press briefing
later on, Nehru declared that, with two-third majority of
the Indian parliament, the Congress Party could do away
with this key clause of the Congress-League agreement,
which convinced Jinnah to forego the demand for Pakistan.
What happened next was inevitable. Muslim League called
on its followers to observe August 16, 1946 as the ‘Direct
Action Day’ to again demand Pakistan in protest against the
Hindu intransigence. In Calcutta, in three days over 20,000
were killed in communal rioting. In a chain-reaction, similar
outbreaks of communal violence occurred in East Bengal
and Bihar. Punjab needed only a spark to explode with fury
that dwarfed the horrors of Calcutta.

Worse still, there was evidence that discipline in administration, the police, and
even in the Army, was beginning to crumble under pressure of sectarianism. These
were clear signs that a partition of India
was inevitable. Duplicity of the Congress
Party manifested by its agreeing to the one
third-two third formulae with the Muslim
League but hiding its real intent of violating this agreement as soon as it could muster a two third
majority in its parliament, left Muslims with no other option.
Given this setting, it was imperative that the British rulers
devised a plan for partitioning of India on a rational and fair
basis. However, Viceroy Lord Wavell’s solution, which he
himself termed as ‘Operation Madhouse’, was to just get out
i.e. withdraw the British rule province by province starting
with women and children, then the civilians, then the Army.
After a great deal of haggling, Prime Minister Attlee, already
tired of the ever-increasing trouble in India, decided that the
British will transfer power to the Indians in June 1948.
But before that, Lord Wavell was withdrawn, and on March
22, 1947 Lord Mountbatten took over as the new Viceroy to
negotiate a modus operandi for the transfer of power; the
big ‘if ’’ therein being that India stays a British dominion – a
condition that Nehru agreed to provided transfer of power
took place in 1947. While Jinnah agreed that Pakistan too
would accept a British dominion status, he did not agree to
let Mountbatten become the Governor General of Pakistan.
Mountbatten went to the extent of telling Jinnah that if he
is appointed the Governor General of India and Pakistan,
he might adopt the title of ‘Moderator’, as suggested by the
late US President Roosevelt. Jinnah knew that Mountbatten
had close links with the Congress Party, and that VP Menon
and Krishna Menon were his close advisors providing a
constant line of communication with Sardar Patel – all three
of them deadly against the creation of Pakistan. In this
setting it was unlikely for Mountbatten to act fairly in crucial
matters.
Mountbatten’s proposed route to partitioning of India was
an indication thereof because it provided for India, Pakistan
and a third entity called ‘Princely State’ – a powerful part of
India that was likely to remain pro-British. Besides, how
biased he was, proved by the fact that even by August 12, 1947
there was still no decision of how India will be partitioned.
Whether Chittagong hill tracts will form a part of Pakistan,
how will Punjab be divided, what would be fate of Kashmir
and what would be the status of the states that did not
decide to join either India or Pakistan.
It is no surprise that the partition of India and subsequent
invasion of Kashmir, Hyderabad, Junagdh and Manawader,
were some of the bloodiest events in history that the British
presided over. It was a clear manifestation of the fact that to be
fair was not the aim of the British, no matter what it cost the
Indian Muslims who fought valiantly in 1857, defending India’s
independence that the British still call “the Mutiny”.

65

August 2012

S ports
Wimbledon: return of
the top performers

O

n July 8, at Wimbledon’s All
England Club, Roger Federer's
victory over the British Andy
Murray in the men’s final secured
for Federer a record-equalling seventh
title, like the tennis legend Pete
Sampras, and returned him to the
top of the world rankings. The day
began with hopes of a milestone
British win in the men’s finals after
76 years, but that optimism was shattered when the Swiss
player Roger Federer again showed his remarkable tennis
skills after a three year-long struggle for regaining form.
The royals were at the Centre Court to back Andy Murray.
British Prime Minister David Cameron joined Prince
William's wife – Duchess of Cambridge – in the royal box.
Besides, former England soccer captain David Beckham
too was present. Sadly, though, for the well wishers of
Andy Murray the day ended with tears; Murray lost to
Federer 4-6, 7-5, 6-3, 6-4 on Centre Court, but he put up a
valiant fight and was applauded by everyone, which he fully
deserved.
For the past two years, victory had eluded Federer. Having
won the men’s singles title for five consecutive years in a
row beginning 2005, it must have been hard for him to wait
three long years in frustration to reclaim this coveted title.
By the time he came to south-west London for his 14th
Wimbledon campaign, his inability to reach the top in 2010
and 2011 had built a hopeless track record. The overly
disappointing part was his form at Wimbledon where he
faced two quarter-final exits: in 2010 (against Tomas
Berdych), and in 2011 (against Rafael Nadal). That Roger
Federer could give a two-set lead in a Grand Slam was a
shocking performance.
To many, 30-year-old Federer was a fading force, and one
of the reasons cited therefor was that, to a father of two
young daughters, tennis was no longer as important as
when he first showed his talents by shocking Pete Sampras
at Wimbledon in 2001. His breakthrough victory, however,
came in 2003 at Wimbledon when he defeated Mark Philippoussis in straight sets opening the floodgates of success.
The following year he grabbed three of the four major
world titles i.e. defended his Wimbledon title and secured
another two maiden triumphs – the Australian and US
Opens men’s singles’ titles. This was the beginning of
Federer’s golden era wherein he won nine of his first 10
Grand Slam finals.
No wonder the emotions he showed after his victory over
Murray suggested this meant much more than just the thrill
of increasing his record tally of major titles to 17 – it was
re-establishing his place in world tennis after his 2010 victory
at the Australian Open. The days thereafter were the toughest period of Federer's career, beginning with a surprise
defeat against Juan Martin del Porto, followed by his defeats
against Tomas Berdych, Wilfred Tsonga, Rafael Nadal and

Novak Djokovic. Critics began doubting his unquestioned right to be
regarded as the ‘greatest’ of all
times. Undoubtedly, age and health
problems seemed threatening for
Federer’s return to his grand form,
but on the evidence of his win on
July 8, and as humorously remarked
by Andy Murray, he is good enough
despite being 30. As for Andy, in his
match with Federer, he established himself as a future champion; he has established himself as a great player and a likely
future champion.
For Serena Williams too, winning the women’s singles title
was a revival despite suffering mentally and physically in the
last one and a half year. After suffering seventeen months
of a life-threatening blood clot in her lungs, her return to the
top was unbelievable; this illness seemed to have ended her
glittering tennis career. But that fear vanished when Williams
defeated Agnieszka Radwanska 6-1, 5-7 and 6-2 defying her
mental and physical scars to climb back to the top. Serena’s
family never hoped she would play in a big event again.
Like her sister Venus, Serena now has five Wimbledon titles
under her belt. This was a career reviving tournament for
her and she too was overjoyed by her success. "I never
dreamt of being here again, being so down. Gosh, just
before that I had the blood clot, I had lung problems, a tube
in my stomach and it was draining constantly. I had two
foot surgeries; it was a lot. I just felt down, the lowest of
lows," said Williams. "Coming here and winning today is
amazing because literally last year I was ranked almost 200.
It's been an unbelievable journey for me," she added. This
victory is her 14th Grand Slam since her last Wimbledon
triumph in 2010.
Inspired by the painful memory of her shock French Open
first round exit against Virginie Razzano last month, Serena
spent the last month in a determined bid to re-establish her
primacy. After Martina Navratilova–1990 Women’s Singles
champion–Serena is now the first woman over 30 to win
this coveted title. She needed all the experience gathered
over her illustrious career to survive the remarkable
23-year-old Pole, Radwanska, but Radwanska too was
severely affected by an upper respiratory illness over the last
few days, and withdrew from the doubles match and
cancelled her pre-match media appearance. She is first Pole
to reach a Grand Slam final after 73 years.
Radwanska may have lost but her change of pace and
nerves seemed to get the better of Serena as she surrendered the set at 5-6, with a succession of errors. Serena had
to battle for every point to finally earn the decisive break for
a 3-2 lead in the third set. Thereafter, she fought well to
finally win with the score 6-2. At 22, Radwanska has a long
career in front of her. Given the talent she showed in this
contest, she has the potential for reaching the top position
and holding on to it for many years.

66

August 2012

S ports
Two great cricketers
leave the scene

P

O

akistan's legendary opening
batsman Alimuddin expired
in London on July 12, after a
protracted illness. He was 81 and
healthy.
Born in Ajmer on December 15,
1930, at the age of just 12 years
and 73 days, he was the youngestever person to play in a first-class
cricket match when he appeared
for Rajasthan in the Ranji Trophy.
As such, his cricketing career
began in as early as 1942, and
went on until 1962–a span of 20
years that saw him achieve great
successes in a period that was
tough, because cricket in PakiAlimuddin
stan was taking roots, umpiring wasn’t at its best nor were there technologies like
Decision Review System (DRS). Besides, cricketers
were rewarded modestly for their services and they
didn’t have all the comforts that today’s cricketers have
at their disposal. What made them achieve records was
their zeal and commitment–things that are sometimes
not visible in the conduct of our cricketers.
After migrating to Pakistan, he entered Test Cricket in
1954 while playing in the series against India, and
scored 103 in the Karachi Test. Later, he was a
member of the team which defeated England at The
Oval, in 1954. He was known for his solid technique
and formed a reliable opening pair with ‘Little Master’
Hanif Muhammad. In the Karachi Test in the 1962
series against England he hit a stroke-filled 109. As
the Pakistan team’s opening batsman, he played 25
test matches between 1954 and 1962–an 8-year
period–and scored 1,091 runs. Besides, in the 140
first class cricket matches that he played, he scored
7,275 runs.
According to Hanif Muhammad, “Alimuddin was my
senior partner, and I learnt a great deal from him. It’s
a sad day for cricket because he served Pakistan with
great deal of honour and dignity.” He remained welldressed throughout his life, and a dedicated cricketer
and a modest person. Another peculiarity was that he
remained a bachelor all his life.
Recalling the memories of his relationship with
Alimuddin, former Pakistan captain Javed Miandad
remembered him for his kindness to junior cricketers.
“Because he was in PIA in London, he always helped
and patronized the cricketers” on their visits to play
against England. He recalled Alimuddin’s role in
building new cricketers and said “Alim Bhai remained
in cricketing circles throughout his life and used to
arrange cricket matches” to enhance activity and build
a competitive spirit in young players.

n July 13, Brett Lee, the
world famous Australian
fast bowler announced that he is
retiring from international cricket;
that this was likely was a prediction he made a few months
earlier. A serious calf injury, which
forced him to return home from
England, was the second major
injury in recent months that
eventually convinced him to call
it a day.
Age was having its effect, and
from 2008 onwards, Lee gave up
playing test cricket, but continued to play in limited-over international matches for Australia
Brett Lee
besides the lucrative T20 competition organized by IPL. Lee was going to play in the
World T20 tournament in Sri Lanka later this year, and had
discussed with the selectors his plans to retire after that
tournament, but the calf injury while playing against
England changed those plans. In his prime, at one time
Lee was the fastest and the most aggressive bowler in the
world and stayed in that category for several years. But
what steadily slowed his career were a variety of injuries
including stress fractures, ankle injuries, side strains, a
broken foot, and more recently, calf injury.
“It [retirement] was going to be post-[T20] World Cup, but
I woke up this morning and felt that the time was right”,
said Brett Lee explaining his retirement. “To play international cricket you need to be mentally and physically 100
percent fit, and I didn’t think it would be fair to the team
or myself if it wasn’t in the case....Looking ahead at the
next two months I just did not have that desire any more.
It’s not a lack of commitment, but you just get to that
point in your life when enough’s enough, and the great run
is at an end.”
Retiring after reaching 35 years of age is not odd because by
the time any player, especially a pacer like Brett Lee, reaches
this stage, he has seen his best days. His track record speaks
volumes about the effort he put in for Australia. In his
career in international cricket, he took 310 test wickets at a
respectable average of 30.81, and 380 one-day international
wickets at an even better average of 23.36 but, unfortunately, had to retire from cricket just one short wicket of
Glenn McGrath’s all-time high Australian record. Had Lee
not been injured at this juncture, he surely could equal, even
exceed this record to end up at the top of the list.
Commenting on Lee’s record, Chairman of selectors John
Inverarity said “Brett has been an absolute ornament to
the game; a fine player, a fierce and brave competitor, a
generous opponent and one who always upheld the highest standards of sportsmanship. He has been a cricketer in
every sense of the word.”

67

August 2012

S ports
Pak-Sri Lanka series:
the questions it poses

P

akistan’ cricket team concluded its tour of Sri Lanka rather
unhappily; it levelled a 2-match T20 series 1-1, lost a
5-match 1-day series 3-1 as well as the 3-Tests series 1-0. Undeniably, weather played a role in crystallizing these very disappointing results but so did the sub-standard performance of
the senior players, both batsmen and the bowlers. Proof
thereof is that the ICC rankings of Yunus, Misbah and Umar
Gul, suffered a fall, Saeed Ajmal’s ranking stayed put, but those
of Azhar Ali, Asad Shafiq and Junaid Khan went up. Azhar Ali
scored two hundreds in the Tests, and Asad Shafiq hit a matchsaving century in the final Test at Pallekele which ended in a
draw. Left-arm pace bowler Junaid Khan took 14 wickets in the
three Tests, including five- wickets hauls in the second and third
Tests. But, as pointed out by Misbah on his return to Pakistan,
fielding was the weakest link in the chain.

There are also questions over the standard of ‘captaincy’ that
was exhibited by Misbah. His laid back attitude in the field
while the bowlers kept committing blunders, and were
repeatedly hit for boundaries, was unforgivable. All he would
do was to smile cynically instead of counselling the bowlers.
The forthcoming series against Australia in the UAE would
be an opportunity to try out promising bowlers and batsmen.
What the PCB should be aiming at is developing a group of
20 players with the required skills – bowling, batting, fielding
and wicket-keeping, so that it has a stock of players that can
play top-class cricket at the international level. Pakistan has
been ranked among the best cricket playing nations in the
world teams; let this remain its distinction.

Hashim Amla: First triplecenturion for SA

P

Asad Shafiq

Azhar Ali

laying in the first Test
against England at Oval,
Hashim Amla created history.
He became South Africa's first
triple-centurion scoring 311
runs without being out. South
Africa won the first test by an
inning and 12 runs. It was the
first Test triple century in
England in 22 years, since
Graham Gooch hit 333
against India at Lord’s in 1990.
Amla was at the crease for
more than 12-and-a-half hours
by the time he completed 300
runs. He surpassed team-mate
AB de Villiers' 278 not out against Pakistan at Abu Dhabi
in November, 2010 - the previous highest Test innings for
a South African.
Amla, who gave only one chance of being out when he
was on 40, went past numerous landmarks, lifting the
tempo of his innings but seldom played a false stroke.
England set ultra-defensive fields but could not halt the
flow of runs by Amla.
A triple century in Test cricket has been scored on 26
occasions by 22 different batsmen from six of the ten
Test-cricket playing nations. Brian Lara and Chris Gayle of
the West Indies, Donald Bradman of Australia and Virender Sehwag of India are the only batsmen to reach 300
more than once. Hanif Mohammad, Inzamam-ul-Haque
and Younis Khan are the three Pakistani batsmen who
scored triple centuries only once in their careers. The fastest
Test triple-century by the number of balls faced (recorded
thus far), was by India’s Virender Sehwag in 278 balls
against South Africa in the first Test of the Future Cup in
Chennai in 2008.

Junaid Khan

The defeat in the Test match series against Sri Lanka ended
Pakistan's unbeaten run of 7 series wins since losing a Test
series to England on the 2010 tour that was marred by spotfixing allegations in the Lord's Test. This unbeaten track
record since 2010 also included a 3-0 whitewash of
England–world’s number one Test team– earlier this year.
Should Pakistan have agreed to the absence of the Decision
Review System (DRS), given the fact that even the best of
field umpires can make errors of judgment? Throughout the
tour matches, the field umpires kept making mistakes and,
tragically, most of the wrong decisions went against
Pakistan.
Who is really responsible for the continued lapses in fielding,
the players or the coaches? The number of dropped catches,
gaffes in stoppable shots that eventually became boundaries,
the almost total incapacity to target wickets so as to ‘run out’
Sri Lankan batsmen, and over-throws, indicate the need for
a re-orientation of the team in fielding disciplines.
What is the team selection policy on the wicket-keepers? Is it
not necessary that, besides the regular wicket-keeper, there
must be a player having this key skill to takeover if the
regular wicket-keeper gets injured?
In the last Test match, Taufeeq Umar proved a poor replacement. Had skipper Misbah taken over that role, perhaps, he
would not have dropped as many catches as did Taufeeq
Umar, nor let so many stumping opportunities go waste
besides the scoring of so many leg byes. These lost opportunities and the extra runs given, made a big difference in the
result of the last Test match that had to be abandoned.
Finally, isn’t it time the senior players took the back seat?

68

August 2012

A rt & Literature
Amir Khusro: the
epitome of brilliance

I

n their book entitled History of India, Elliot and
Dawson recorded that “Amir Khusro, the ‘Parrot of
Hind’, whose name was Yamin-ud-Din Muhammad
Hassan, was one of the most prolific poets the world
ever produced, for he is said to have left behind some
half a million verses. Without answering for the accuracy
of this prodigious number, a mere glance at the list of
his creations establishes the boundless fertility of his
muse.”
The majesty of Amir Khusro as a poet, mystic, and
inventor of both music and musical instruments, continues to amaze every one for the past seven centuries.
Critics the world over rank him as a legend in the true
sense of the word.
After its conquest by Chengiz Khan, the residents of
Hazar- e-Lachin, including Amir Khusro’s father, Amir
Said-ud-Din had to migrate to India. Said-ud-Din settled in
Patiala and was later married to a daughter of Imad-ulMulk. Amir Khusro was the second of the three sons of
Amir Said-ud-Din. By the time he was eight years old,
Amir Khusro’s father died and thereafter he was brought
up by his maternal grandfather Imad-ul-Mulk, who was an
influential courtier of Sultan Altamash, then the ruler of
Delhi.
Because Amir Khusro was brought up in a literary
environ-ment by his grandfather, by the time he died,
Amir Khusro had earned a name for himself as an
upcoming poet with the promise of excelling, and this
quality made him the favourite of all the kings that ruled
Delhi beginning with Sultan Ghayas-ud-Din Balban in 1273
to Ghayas-ud-Din Tughlaq in 1325, the year Amir Khusro
departed for the heavens. This includes a tough period in
1285 when he was imprisoned by the Tataris while Amir
Khusro was fighting on the battlefield to defend the then
ruler of Delhi.
During his childhood, he developed an interest in mysticism, and often spent time with Hazrat Khawjah Nizamud-Din, and in 1272 he became his disciple and began
learning from him the real purpose of life, which eventually made him a mystic, linguist, and musician who stands
out as an example for the rest. He was an expert of Turkish and Persian, and thereafter became an expert of
Hindi too because, to spread the message of Islam – the
desire of his master Hazrat Khawjah Nizam-ud-Din – this
was imperative.
His singular contribution in the field of linguistics is
combining Hindi with Persian to create a new language,
that finally became Urdu. The success that he achieved in
this field was proved by the fact that, centuries later, even
Mirza Ghalib had to accept him as the authority in
linguistic matters, and in his famous book Aud-e-Hindi,
admitted that Amir Khusro’s use of a word or expression
was the ultimate test of the validity of its use–a fact later
confirmed by Sir Syed Ahmed Khan in his documentation
of Indian history in Aasar-us-Sanadeed.

Besides Sir Syed, Shibli Naumani, another
great linguist, accorded Amir Khusro
the status of an incomparably great
poet. In Shibli’s view, while Firdausi could
compose only Masnavis, Saadi could not
compose Qaseedas, and Hafiz, Urfi, and
Naziri couldn’t go beyond the realm of
Ghazals; Amir Khusro alone composed
all of them and with remarkable success.
That is not all; he invented the Dohas–a
new form of poetry–that later became
an accepted style.
Maulana Abdul Halim Sharar admired Amir Khusro for giving
Indian music its present profile. Amir Khusro composed the
Tarana, Qawwali and Rung, and his invention of the Sitar and
Tabla–instruments without which Indian music simply can’t
be composed–were the trend setters; that so much of genius
could reside in one human being is simply mind boggling.
While studying the lives of great men and women, the
critics assess how much they were influenced by the trends
of their time and to what extent they influenced those
trends because while history creates great personalities,
greater personalities create history. Writing about Amir
Khusro, Dr Tara Chand said “it is said that a poet is the
mirror of his time. Khusro is an example of the truth of
this axiom. His poetry brilliantly reflects the Indian mindset
of the 13th and 14th century – the bright spots in politics,
grandeur of royalty, perfect portrayal of social values,
colourful reflections of life, twists and turns of love,
dialogue of the worshippers of love, tragedies, genius, and
how it helps overcome issues – all wrapped in a mystical
description thereof.
According to Gibb, Kramer, Levi-Provencal and Schacht,
all editors of The Encyclopaedia of Islam, “Works of Amir
Khusro provide the fullest single expression extent of
medieval Indo-Muslim civilisation; they revealed, as
perhaps does no other surviving body of Indo-Persian
literature of that time, the religious, ethical, cultural and
aesthetic ideas of the courtly, educated and wealthy Indian
Muslims of the 13th and 14th centuries.”
According to A.C. Banerjee in his book Medieval Studies,
there are very few literary men in medieval Indian history
who can lay claim to the wide personal knowledge of men
and events during a period extending over half a century,
which it was the privilege of Amir Khusro to possess.
Though he wisely confined his activities to the sphere
wherein his genius shone with ‘unrivalled’ brilliance, and
never aspired after any direct participation in political
affairs, his unique experiences must have made him an acute
observer of events–a consideration that enhances the value
of his testimony with regard to the history of his times,
because in dealing with an age, of which little contemporary
evidence has survived, the best material we can hope to
seize is the version of an intelligent observer, who had
access to all court intrigues, but no share therein.

69

August 2012

Q uotes
“I am not
saying drones
have not assisted
in the war
against terror,
but they have a
diminishing rate
of returns. We
will seek an end
to drone strikes and there will be no compromise on that.” – Sherry Rehman,
Pakistan’s Ambassdor to the United
States stated talking to White House
war adviser Douglas Lute to an audience at the Aspen Security Forum on 27
July, 2012.
“Preserving
price stability
must be the
principal role
of the ECB
and not the
financing of state debt. Buying government
bonds cannot be a permanent solution. We
only establish new trust in the Eurozone
if budget discipline is strictly maintained
and structural reforms are implemented.”
– Germany’s Economy Minister Philipp Roesler stated in an
interview published on July 28,
when he warned the European
Central Bank against any largescale government bond purchases.

“We will not consider
appeals and give
consent to searches of
vessels sailing under
the Russian flag, nor
to the application of
other restrictive measures to them”.
Russian Foreign Ministry spokesman
Alexander Lukashevich.

“The cyber bad guys are
expected to be prowling for user
data through a method called
“search engine poisoning”, in
which they manipulate search
engines to display results that
take users to malicious sites.” -- Alex Kirk, Senior
researcher at Sourcefire Inc. warning about cyber
attacks in connection with London Olympics. Olympics organizers are spending about $750 million on
technology alone, a quarter of its $3.1 billion budget.
“There is a regime that massacres its
own people. We must do what we can
do to make some important progress
in trying to avert this appalling situation”. Turkish President
Recep Tayyip Erdogan urged
international action in Syria.

“Instead of doing what’s
right for middle-class families and small-business owners,
Republicans in Congress are
holding these tax cuts hostage until we extend tax cuts for the wealthiest Americans. Republicans in Congress and their nominee for president believes that the best way to create prosperity in America is to let
it trickle down from the top.” – US President Barack Obama
addressing via radio and internet on July 28, on stalemate
that could increase taxes on Americans next year.
70

August 2012

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CANCER: Your Sun will stay in your
money house by making Sextile with Jupiter
in 12th house, on 3rd Aug. It will create a
balance in income and expenditure in accord
with financial betterment. The ruling planet
of money, Mars, will stay in the 4th house by
making Conjuction with Saturn from 15th to 16th Aug. The very
situation will take you to lead your domestic tasks with more
active participation but counseling will be required in property
related issues. Sun, your ruling planet of money house, from
21st to 22nd Aug will give birth to Sextile with ruling planet of
10th house. This movement will not only overwhelm you by
providing you chance of success in the career but you will find
an ability to deal with your professional tasks with a refreshing
thought. Moreover, you will explore the world through travelling
that will give you unlimited financial benefits. If you set your
goals before, their achievement will become easier.

ARIES: Your ruling planet Mars will
stay in 7th house from 1st to 23rdAug, and
this aspect will bring your social and
domestic life under spotlight. The role of
Mars in 8th house will bestow you with
benefits in marital and societal matters
along with the betterment in the issues
related with inheritance from 24th to 31st Aug. Saturn-Mars
Conjunction will put your anger and emotions on fire but by
controlling yourself you can make your performance better
in business and domestic sphere. The utmost need of discipline will be heightened. From 21st and 22nd Aug, SunMars Sextile will urge you to attain your goals and eventually
success will be yours. Moreover, you must be self- confident
and plan wisely to solve your current problems. MarsNeptune Trine will make your decision-making power more
realistic. Your extraordinary courage will bring positive
results in your way while you will utilize your right of
expression in a satisfactory manner.

LEO: Your revolutionary brain will bring

positive change in your financial matters and
resources as your ruling planet Venus is
moving in the house of money. You will find
chances of recreation due to the role of
Venus in 3rd house, from 8th to 31st Aug; it
will strengthen your affection for relatives.
Love affairs will gain more sensitivity but you will show
positive approach by taking wise decisions under VenusNeptune Trine from 10th to 11th Aug. It will become a
source of unfathomable desires. From 15th to 16th Aug,
Venus-Pluto competition will tempt you towards opposite
sex whereas some psychological problems will also keep on
nagging you. So, be careful and do not take decisions
without consulting experts. Venus-Uranus Square on 16th
Aug, will influence your social life and put you in social
problems. Lack of decorum and your moody attitude will
cause anxiety. You should join the company of some sincere
and intimate ones for assistance.

out new ideas and their utility in your specific
field will give you standardized output. It will
enrich you with respect and fame with the
help of Sun, your ruling planet from 1st and
22nd Aug. From 23rd to 31st Aug, Sun will
step into the house of money; it will urge you to make positive
decisions in business. You will also witness a boost in your confidence level. Students must keep it in mind that educational role
will remain vital in their lives. From 17th to 18th Aug,
Sun-Saturn Sextile will develop your good relations with higher
authorities. You will trace your boundaries and limitations but
your output will be marked with excellence. Sun-Mercury Sextile
will advance your desire to bring positive changes whereas you
will not only utilize your ability to cope up with problems but
attain success. The competition between Sun-Neptune from
24th to 25th Aug, will create misunderstandings with intimate
relatives. So, do not take momentous decisions. Sun-Pluto Trine
from 30th to 31st Aug, will not only instill a desire for empowerment but it will also increase your trust on others. You will be
able to exercise your financial power finally!

GEMINI:

VIRGO:

TAURUS: On 7th Aug, you will find a

Mercury, your ruling planet,
will stay in 12th house by being retrograde
from 1st to 8th Aug whose influence will
tempt you to control your expenditure and
be careful of envious fellows. From 9th to
31st Aug, Mercuryâ&#x20AC;&#x2122;s stability will put an end
to your problems. You will get an edge on
enemies. You will face problems because of your experimental
attitude and unnecessary expression of ideas. The keen responsibility of this activity is concerned with Mercury- Uranus
Trine from 19th to 20th Aug. Mercury-Jupiter Sextile will cause
determination in decision making from 23rd to 24th Aug. You
will take profound interest in scholastic activities. The very
situation will bring out positive attitude in you that will remove
your hurdles. From 30th to 31st Aug, Mercury-Saturn Sextile
will bring strong ideas and they will ensure your success.

The very first week of
the month will demand your rapt attention due to the movement of Mercury in
3rd house from 1st to 8th Aug. Mercury
will remain stable, from 9th to 31st Aug,
which will vanish the possibility of problems and you will
win co-operation from relatives. Your ideas and plans will
scatter under the pressure caused by Mercury-Uranus
Trine from 19th to 20th Aug. Some unimportant plans and
ideas will cause delay in recent tasks. So, be careful! From
23rd to 24th Aug, Mercury-Jupiter Sextile will empower
you to keep an eye on certain issues in progress. Your
interest in educational sphere will be heightened and you
will advance with positivity under Mercury-Saturn Sextile
from 30th to 31st August.

73

August 2012

A strology
LIBRA: Venus, your ruling planet,
will stay in 9th house from 1st to 7th Aug
that will create in you a wish for higher
education, poetry and literature. From
8th to 31st Aug, movement of Venus in
10th house will ensure your success in
career. Moreover, you will get support
and practical help from friends and intimate ones. You
will be attracted by the opposite sex and will make
pleasant relations. From 10th to 11th Aug, VenusNeptune Trine will make you sensitive. Your focus on
romantic world will make you more determined. From
15th to 16th Aug, the jealous ones can plot against you;
be ware! You will find complications in property dealings. From 16th to 17th Aug, Venus-Uranus Square will
make your nature irritating. The uncertainty will
become obvious in surroundings; do not take vital decisions on your own without consultation and accept the
challenges of fate.

CAPRICORN:

Your career and
job will go on smoothly due to Saturn;
your ruling planet is going to stay in the
house of money. But domestic issues
require help from elders especially your
father and then you will be able to get
good results. From 15th to 16th Aug, Mars- Saturn
Conjunction will cause both negative and positive influences. You will begin with a new struggle for the accomplishment of tasks while your business and job will attain
excellence. From 17th to 18th Aug, Sun-Saturn Sextile will
help you to be determined and this act will influence your
subordinates to support you. Your serious attitude will
create positive aura while your creativity will be heightened
and it will earn you benefits under Mercury-Saturn Sextile
from 30th to 31st Aug.

AQUARIUS:

You will not only
enter into the world of literature but your
way towards higher education will
become smooth due to the stay of your
ruling planet, Saturn, in 9th house all
through this month. You will notice a
desire for foreign visit. Your subordinate
ruling planet, Uranus, will be in a retrograde position in the
3rd house and it will make you focus on travelling strategies.
Your hopes concerned with relatives will remain unfulfilled.
From 15th to 16th Aug, under Mars–Saturn Conjunction
you need to control your anger because it will harm you in
business and job. From 16th to 17th Aug, Venus-Uranus
Square will make you expressive but it will also become a
sound reason for your anxiety. From 17th to 18th Aug,
Sun-Saturn Sextile will make your officials to co-operate
with you and strong determination will award you success.
During Mercury–Uranus Trine, your experimental attitude
will guarantee success by restraining haste in technical work
from 19th to 20th Aug. From 30th to 31st Aug, MercurySaturn Sextile will increase your level of determination
which will not only ensure your success but also help you
find solutions to your queries.

SCORPIO: From 1st to 23rd
Aug, your ruling planet, Mars, will
ensure your success in management
affairs due to its stay in 12th house but
you need to keep an eye on expenditures. From 24th to 31st Aug Mars will
be on its peak which will influence your
brain’s revolutionary process; you will be free from
disturbances but it will be a temporary relief. In 3rd
house, Pluto will be in a retrograde position so you
should adopt a very careful attitude. You can be irritated
by your neighbors. From 14th to 15th Aug, situation will
be more problematic that will cause you to waste money
and time also; try to be focused. Mars-Saturn Conjunction will delay your success but a number of happenings
will lead you towards desirable destination from 15th to
16th Aug. Sun-Mars Sextile, from 21st to 22nd Aug, will
inject fighting spirit and you will brandish sword against
dangers. You can pursue your struggle for gaining confidence. From 26th to 27th Aug, Mars-Neptune Trine will
make you realistic that will bring improvement and
reward in routine life. Under Sun-Pluto Trine, from 30th
to 31st Aug, you will rely on yourself for attainment of
your set goals.

PISCES: Your ruling planet, Jupiter’s stay in
4th house will create possibility of financial benefits
from property and some business deals. Your
subordinating ruling planet, Neptune, will be in an
ascendant position that will become a source of
tension and negative thoughts. From 2nd to 3rd
Aug, Sun-Jupiter Sextile will urge you to exaggerate
the factual happenings while accomplishment of tasks will
demand a strong fighting spirit against delays. From 10th to
11th Aug, Venus-Neptune Trine will make you walk on the
road of love, desires and arts and you will be calm due to determined decisions. On 23rd Aug, Jupiter-Mercury Sextile will
move your decisive senses positively. You will become more
interested in academic endeavors. From 24th to 25th Aug,
Sun-Neptune will have a competition which will cause misunderstandings. So, be careful. During Mars-Neptune Trine from
26th to 27th Aug, your decisive capacities will be beneficial for
you. Your sentimental expressions will become stronger.

SAGITTARIUS:

You will
attain marital bliss and success in
social sphere under the stay of Jupiter, your ruling planet, in 7th house.
Your delayed tasks will be accomplished by others’ co-operation while people desiring
to tie a knot will see green signals. From 2nd to 3rd
Aug, Sun-Jupiter Sextile will urge you to travel and
you will deal with your tasks that are still in the pipeline by bringing them on a larger scale without thinking of dangers. Mercury-Jupiter Sextile will make
your decisive capacity reliable. You will feel tempted
with the charm of educational world and strong
support of relatives will move you positively.